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NYC and NY State Transfer Taxes: What Are They and Who Pays Them?

If you are selling property in New York City, one thing you need to be keenly aware of are closing costs — especially transfer taxes. After the commission that you pay to the brokerage that represented your listing, your largest cost — other than a flip tax (more on that below) — will likely be transfer taxes, which are levied both by New York state and New York City. So how much are these transfer taxes, and does the seller always have to pay them?

When Is the NYC Transfer Tax Applied?

The NYC transfer tax, formally known as the Real Property Transfer Tax (RPTT), must be paid whenever real estate is transferred between two parties. It applies to all residential properties in NYC, including townhouses, condos and co-ops. Outside of NYC, a statewide transfer tax applies.

What About a Flip Tax?

For sellers in certain co-ops, the so-called flip tax can be larger than the transfer tax. A flip tax can range from a very modest $500 to 15% or more of the sales price. These larger flip taxes arise in buildings that were previously income-restricted HDFC apartments. If owners in these buildings are now permitted to sell their shares for fair-market value, they’re likely making a huge windfall. Hence, the co-op feels entitled to share in this money via a flip tax.

How Much Are the NYC and NY State Transfer Taxes?

With the passage of the 2020 state budget, the NYC transfer tax remains the same, but the New York state transfer tax has increased for purchases over $3 million. (The mansion tax was also substantially revised for fiscal year 2020; more on that here.)

  • NY state transfer tax: 0.4% of sales price for properties below $3 million, and 0.65% for purchases over $3 million.
  • NYC transfer tax (sales price is $499,999 or less): 1.0% of sales price
  • NYC transfer tax (sales price is greater than $500,000): 1.425% of sales price

For example, if a property sold for $499,999 or less, the combined total transfer tax is 1.4% of the sales price. If the property cost more than $500,000, the total transfer tax is 1.825 to 2.075%, depending on the price.

NYC and NY State Property Transfer Taxes as of FY 2020

Property Sale Price NY State Transfer tax NYC Transfer Tax Total Transfer Tax
$499,999 and less  0.40%  1.00%  1.40%
$500,000 – $1,999,999  0.40%  1.425%  1.825%
$2,000,000 – $2,999,999  0.40%  1.425%  1.825%
$3,000,000 – $4,999,999  0.65%  1.425%  2.075%
$5,000,000 – $9,999,999  0.65%  1.425%  2.075%
$10,000,000 – $14,999,999  0.65%  1.425%  2.075%
$15,000,000 – $19,999,999  0.65%  1.425%  2.075%
$20,000,000 – $24,999,999  0.65%  1.425%  2.075%
$25,000,000 or more  0.65%  1.425%  2.075%

 

Examples of Transfer Tax Costs

Selling for $425K: Imagine you were selling a studio on the Upper East Side for $425,000. Because the sales price is below $499,999, the total transfer tax rate would be 1.4%. This is the sum of the New York state transfer tax (0.4%) and the NYC transfer tax (1%). The total amount of transfer tax owed is $5,950 ($425,000 x 1.4%).

Selling for $2.4M: If you were selling a 2-bedroom loft in Tribeca for $2,400,000, you would be paying a transfer tax of 1.825%, as the sales price is above $500,000. Based on the sales price, the total transfer tax would be $43,800 ($2,400,000 x 1.825%).

Selling for $5M: If you sold a $5M property in Gramercy Park, you would be paying a total transfer tax of 2.075%, which would cost you $103,750 (1.425% for NYC and 0.65% for NYS)

Who Pays Transfer Taxes in NYC?

Generally speaking, in NYC, the seller covers the transfer tax. However, there is one important caveat. With a new development property, the sponsor might ask that the transfer tax be paid by the buyer. Sometimes developers will pick up the tab as a point of negotiation. But this is all based on market conditions and how quickly a developer needs to move the unit. Additionally, if a buyer is paying the transfer tax, they cannot finance its cost. They need to have this cash available at closing.

To summarize, buying and selling property in NYC incurs numerous fees and taxes. Speak with a broker and a real estate attorney about all the closing costs involved to get an accurate understanding of what you’ll need to pay.

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