Transfer tax exemptions NYC
If you’re selling a property in New York City or even just transferring ownership in one of the many corporations that own properties here, you have to pay a transfer tax NYC. This is a significant cost and, depending on the sale price of the property, it can be more than you expect. The good news is that there are some exceptions that can save you some money. This article takes a look at the NYS and transfer tax NYC, who pays them, and how they come about.
What Is a Real Property Transfer Tax?
The Real Property Transfer Tax (RPTT) is a municipal tax that is paid whenever there is a change of ownership in any type of real property in New York City. This includes the sale of a single-family house, two-family house, three-family house, or multiple-dwelling unit in a co-op apartment building. It also applies to the sale of a condominium unit in a building or of shares of stock in a cooperative housing corporation.
RPTT is levied at a rate of 1% of the sales price of the property. This is significantly less than the 4% or so that you might expect for a typical real estate transaction in the city. The transfer tax NYC is in addition to the 1% New York State mansion tax that applies when a property sells for over $3 million.
Who Must Pay the Transfer tax NYC?
The responsibility for paying the state and city transfer tax NYC typically lies with the seller unless it is explicitly stated otherwise in a binding contract between the parties. If the seller does not pay the transfer tax NYC, the obligation then becomes the responsibility of the buyer. This is especially true in sponsor units in new developments where the responsibility for paying these fees may be negotiated as part of the deal.
There are a few exceptions to this rule, but the most common are when the seller is exempt from paying the transfer tax NYC. For example, if the property is owned by either the federal government or a foreign country that uses it for diplomatic and consular purposes, then it will be exempt from paying RPTT. In some cases, this can save you up to $1,700 in transfer tax NYC.
If the property is not exempt, then the RPTT will be based on a formula that takes into account the size of the sale and the location of the property. For example, a 1-4 family house in Brooklyn will have a lower transfer tax NYC than a penthouse in Manhattan.
If you are selling a property in NYC, make sure that you understand the RPTT and how it affects your closing costs. Then, if you are in a position to avoid paying the RPTT altogether, do so! You might find that the tax savings can help you pay for some of the other closing costs associated with your sale. This will make your closing a little bit easier and help you get to the finish line with some cash left over.
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