Understanding New York Transfer Tax: A Quick Guide

What are transfer taxes?

The Federal Trade Commission defines transfer taxes as a “state or local tax payable when title to property passes from one owner to another.”

Essentially, when you pass the title of your home—your legal right to own the property—to someone else, the government charges a tax on this exchange.

Where your property is located will determine what you’ll owe in transfer taxes according to local state, county, or city guidelines. Like other taxes, these are designed to generate revenue.

Who pays for transfer taxes?

Who pays for the transfer taxes will also depend on where you live.

In New York, according to the New York State Department of Taxation and Finance, the seller is on the hook for the bill.

However, there are some exceptions. If the contract between the seller and the buyer allows for it, the buyer might be able (or required) to pay the tax. Similarly, if the seller is unable to or does not pay the transfer tax, the buyer is required to pay.

In such cases, the tax becomes a liability of both parties and as a result, the buyer could be granted cause against the seller and be entitled to payment recovery of the transfer tax from the seller.

What are the types of transfer taxes?

Transfer taxes will typically vary based on local guidelines but can generally be broken down into three categories — state, city, and county, depending on the state. Here’s a quick look at how it works in New York.

State transfer taxes

According to the New York State Department of Finance, taxes are levied at a rate of two dollars for $500 of consideration. The state also has a “mansion tax,” which is an additional tax of 1% of the sale price, applicable to residences when the value is $1 million or higher.

County transfer taxes

County taxes can vary relative to the state, in addition to any city and state taxes. For example, in Broome County in New York, the transfer tax is $5 per $1000, with a portion going to the state and the other to the county.

City transfer taxes

The transfer tax in New York City, for example, will apply to properties sold or transferred in an amount over $25,000. These rates will vary depending on the type of property. For properties valued less than $500,000, the rate is 1% of the price. For properties valued over $500,000, the rate is 1.425% of the price.

As of 2019, New York City has its own tax considerations in addition to state requirements. A tax of $1.25 for each $500 in value is levied when a residential real estate property is $3 million or more. This also applies to non-residential properties at the same rate for properties valued at $2 million or higher.

For residential properties of $2 million or higher, a supplemental tax is levied at an incremental rate that ranges between .25% and 2.9%, based on the purchase price.

Other transfer fees

In addition to transfer taxes, there are possible fees to consider, such as from a homeowner’s association or another local neighborhood organization. Again, as these can vary heavily based on location, it’s important to consult a professional.

If you’re selling your home for sale by owner, consulting a professional might help with some of the finer points of the process and give you a better idea of what you can expect.

Are transfer taxes deductible?

Transfer taxes are, unfortunately, not eligible for tax deduction.

However, you might be able to lower the amount you pay in capital gains taxes.

Capital gains, defined as the profit obtained from the sale of your home or the financial gain from selling your property, are subject to federal taxation just like profits from the sale of other assets.

Sellers have the option to treat paid transfer taxes as selling costs, allowing them to subtract these from their home’s closing sale price. By doing so, they can diminish the capital gains taxes owed on any profit earned.

Transfer tax exemptions

You may not owe transfer taxes on your home sale, depending on your circumstances, but such exemptions will vary depending on your state.

In New York City, for example, there are several possible exemptions, though the property transfer still must be reported on a Real Property Transfer Tax Return. According to the New York City Department of Finance, this can include (but is not limited to) a deed, instrument, or transaction:

• “to or from a non-profit organization formed and operated exclusively for religious, charitable or educational purposes, or for the prevention of cruelty to children or animals;
• “given by an executor outlined within the terms of a will. However, a deed given by an executor in connection with a sale of an interest in real property is taxable”;
• “given solely as security for a debt or a deed/instrument given solely to return such security”;

These are just some examples. Be sure to consult a real estate attorney or tax professional if you are unsure about what you may or may not owe when the sale is complete.

Estimating transfer taxes for your home sale

Try HomeLight’s Net Proceeds Calculator for a quick estimation of what you’ll make from selling your home. This calculator takes into account your closing costs, including transfer taxes, agent fees, and any renovations, to give you a clear picture of your financial outcome.

For an accurate assessment of your transfer taxes and other closing expenses before closing your home sale, consider collaborating with a top real estate agent.

These expenses, often thought to be the buyer or seller’s responsibility, can actually be negotiated depending on the market situation. The key is to discuss transfer taxes with your agent from the start so you can understand if you can negotiate these costs.

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