NYC Luxury Real Estate tax
With the New York City real estate market continuing to reach new heights, most current real estate owners have probably enjoyed a nice increase in their property’s value over the time that they have owned it. If you are one of those owners and are considering selling to lock in those gains, you are probably wondering how much your home is worth and just how much you could net from a transaction.
Your home’s value (and your broker’s ability to maximize it) is clearly the key driver of how much cash will end up in your pocket, but closing costs will make a significant impact. Those costs include New York City and New York State Real Property Transfer Taxes (RPTT), and figuring those payments out can be complicated. We strongly recommend seeking professional advice on these matters, but below is an overview to get you started.
The (Basic) Numbers
The NYS transfer tax is actually very simple – it is always 0.4% of the sale price. If you sell for $1 million, the NYS state transfer tax is $4, 000. In a $10 million sale, it would be $40, 000. That is it.
- 1.000% of the sale price if it is $500k or less, or
- 1.425% of the sale price if it is over $500k.
NYC transfer taxes on your $1 million sale would be 1.425% or $14, 250. Combined NYS & NYC transfer taxes would be 1.825% or $18, 250. Simple, right? Not always.
There is a wrinkle here that could end up pushing your tax bill significantly higher than outlined above. It lies in situations where NYC determines that more than one condominium or co-op unit were transferred in a given transaction (i.e. a “bulk” sale). In those cases, the City charges a rate of 1.425% if the sale price is less than $500k and 2.625% if the sale price is over $500k. Combined with the NYS tax of 0.4%, total transfer taxes on that $1 million sale if multiple units were involved would equate to over 3.0% of the sale price.
This New York Law Journal piece gets into more detail, but the basic litmus test for determining whether a deal is a “bulk” sale is whether there is more than one kitchen in the unit(s) being transferred. Such determination can get pretty tricky when multiple units have been combined or may be combined, a path that can often be the easiest way for some to secure a NYC apartment that meets their needs. The New York Law Journal also points out that if there is any question about the transaction the City defaults to the higher rate and the onus is on taxpayers to prove their situations should be subject to the lower rate.
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