The New York State Transfer Tax and NYC Transfer Tax Explained
The New York State Transfer Tax and NYC Transfer Tax Explained
What Is the NYS and NYC Transfer Tax?
Buying or selling real estate in New York City comes with a unique set of costs, and among the most significant are the real estate transfer taxes. These are fees levied by both the New York State (NYS) and New York City (NYC) governments on the transfer of real property, which includes single-family homes, condominiums, and cooperative apartments. Think of it as a transaction fee for a change in ownership, used to generate revenue for the state and city.
The key takeaway is that in NYC, you're dealing with two separate transfer taxes: the New York State Transfer Tax and the New York City Real Property Transfer Tax (RPTT). While they serve a similar purpose, their rates and who pays them differ, making it crucial for buyers and sellers to understand both.
Who Pays the New York State Transfer Tax?
In most real estate transactions, the seller is responsible for paying the NYS Transfer Tax. The tax is part of the seller's closing costs and is a significant expense that must be budgeted for.
NYS Transfer Tax Rates
The tax is calculated at a rate of $2.00 for every $500 of the consideration (the sale price). This is equivalent to a rate of 0.4%.
Example: On a $1,000,000 sale, the NYS Transfer Tax would be $4,000 ($1,000,000 / $500 = 2,000; 2,000 x $2 = $4,000).
There is an additional tax for high-value properties. The NYS Transfer Tax also includes a separate "mansion tax" of 1% that applies to residential properties with a consideration of $1 million or more. Unlike the NYC mansion tax, which is paid by the buyer, this 1% additional tax is paid by the seller.
The NYC Real Property Transfer Tax (RPTT)
The NYC Real Property Transfer Tax is a separate municipal tax that applies to the transfer of real property and cooperative apartment shares in New York City. This tax is also typically paid by the seller at closing.
The rates are tiered and depend on both the sale price and the type of property.
NYC RPTT Rates for Residential Properties
Purchase Price | NYC RPTT Rate |
$500,000 or less | 1.0% |
Greater than $500,000 | 1.425% |
NYC RPTT Rates for Non-Residential Properties
Purchase Price | NYC RPTT Rate |
$500,000 or less | 1.425% |
Greater than $500,000 | 2.625% |
Important: For residential properties with a sales price of $3 million or more, an additional base tax of $1.25 for each $500 of consideration is also applied. This is a crucial detail for sellers of high-end homes to consider.
The NYC Mansion Tax: A Separate Cost for the Buyer
This is perhaps the most misunderstood part of NYC's transfer tax structure. The NYC Mansion Tax is a completely separate tax from the NYS and NYC transfer taxes. It is a one-time, progressive tax that is paid by the buyer at closing. It applies to all residential property purchases (including condos, co-ops, and single-family homes) with a sales price of $1 million or more.
The Mansion Tax is not a flat rate but a progressive, tiered system that increases with the purchase price.
NYC Mansion Tax Rate Schedule
Purchase Price | Tax Rate |
$1,000,000 to $1,999,999 | 1.00% |
$2,000,000 to $2,999,999 | 1.25% |
$3,000,000 to $4,999,999 | 1.50% |
$5,000,000 to $9,999,999 | 2.25% |
$10,000,000 to $14,999,999 | 3.25% |
$15,000,000 to $19,999,999 | 3.50% |
$20,000,000 to $24,999,999 | 3.75% |
$25,000,000 or more | 3.90% |
How to Calculate Your Total Transfer Tax
To get a complete picture of transfer tax costs, you must combine the relevant state and city taxes. Here’s a step-by-step breakdown using common scenarios.
Scenario 1: Selling a $750,000 Co-op (Seller Costs)
1. Calculate NYS Transfer Tax:
$750,000 / $500 = 1,500
1,500 x $2 = $3,000
2. Calculate NYC RPTT:
$750,000 is greater than $500,000, so the rate is 1.425%.
$750,000 x 0.01425 = $10,687.50
Total Seller Transfer Tax: $3,000 + $10,687.50 = $13,687.50
Buyer's Cost:
The Mansion Tax is only triggered at $1 million.
Total Buyer Tax: $0
Scenario 2: Selling a $1.5 Million Condo (Seller & Buyer Costs)
Seller's Costs:
NYS Transfer Tax: $1,500,000 is over the $1 million threshold, so the 1% additional tax applies.
Base Tax: $1,500,000 / $500 = 3,000; 3,000 x $2 = $6,000
Additional Tax: $1,500,000 x 0.01 = $15,000
Total NYS Tax: $6,000 + $15,000 = $21,000
NYC RPTT: $1,500,000 is greater than $500,000, so the rate is 1.425%.
$1,500,000 x 0.01425 = $21,375
Total Seller Transfer Tax: $21,000 + $21,375 = $42,375
Buyer's Cost:
NYC Mansion Tax: $1,500,000 falls in the $1M to $1.99M bracket, so the rate is 1.00%.
$1,500,000 x 0.01 = $15,000
Total Buyer Tax: $15,000
FAQs About Transfer Taxes
Q: Are there any exemptions for first-time homebuyers?
A: Unlike some states, New York does not offer a specific transfer tax exemption for first-time homebuyers.
Q: Who pays the transfer tax on new construction?
A: While sellers traditionally pay, it is a common practice in new developments for the builder to pass the transfer tax obligation onto the buyer. This will be outlined in the contract of sale.
Q: What is a flip tax?
A: A flip tax is a fee charged by a cooperative building on the sale of a unit. It is not a government tax but a building fee. The amount and who pays it are determined by the co-op's board, and it's a separate cost from all state and city transfer taxes.
Tips & Takeaways for Buyers & Sellers
For Sellers: Transfer taxes are one of your largest closing costs, often second only to the broker's commission. Factor this into your sale price from the beginning. While transfer taxes can sometimes be negotiated, it’s not common practice. You can, however, use them as a deductible expense on your federal income tax return.
For Buyers: If you are purchasing a residential property for $1 million or more, be prepared to pay the NYC Mansion Tax. This is a significant added cost that must be included in your budget.
For All: Always work with an experienced NYC real estate professional and attorney to ensure you have a clear understanding of all your closing costs, including transfer taxes, and to review your contract carefully. This is especially true with new construction, where the responsibility for these fees may shift to the buyer.
At Yeo Real Estate, we believe in providing our clients with a transparent and stress-free experience. Our data-driven approach and in-depth market knowledge mean you'll never be surprised by unexpected costs.
Ready to navigate the NYC market with confidence? Contact us today for a free consultation and let us help you achieve your real estate goals.