Anyone selling an NYC apartment needs to be mindful of closing costs, especially transfer taxes. They are your highest cost, generally after paying the listing agent’s commission. These taxes are imposed both by New York State and New York City. So how much are these transfer taxes, and do home sellers have to pay them? Below, we look at how these taxes work in NYC and what you need to know about them.
NYC transfer taxes
Real Property Transfer Tax (RPTT)
You have to pay the Real Property Transfer Tax (RPTT) on sales, grants, assignments, or transfers of real property in New York City. You also have to pay RPTT for the sale or transfer of at least 50% of ownership in a company, partnership, or other entity that owns or leases property and transfers communal housing stock shares.
Property Transfers are Subjected to the Tax
RPTT is involved whenever the sale or transfer is over $25,000. This includes state or federal government-owned estate transferred to a non-government entity.
Who is Exempt from this Tax?
- The United States Government
- New York State, its agencies, and political subdivisions
- A foreign government, an individual acting on behalf of a foreign government, or the head of a foreign government’s diplomatic mission.
Amount Paid
The amount paid depends on the value and type of the property. In most residential transfers of property, if the value is under $500,000, the rate is 1% of the sale price. If the value is over $500,000, the transfer tax rate is 1.425%.
On other types of property transfers (including multi-unit dwellings), the rates are 1.425% for properties under $500,000 and 2.625% for those valued higher than 500,000.
New York State transfer taxes
Real Estate Transfer Tax
There are presently two New York State real estate transfer taxes.
The first is a transfer tax on each transfer of real property where its value is more than $500. This tax is charged at the rate of 0.4% and is generally paid by the seller.
But, under the law change that took place on July 2019, a higher transfer tax will apply to the transfer of specific real estate occurring within cities having a population of over one million. In accordance with the new law, residential property in these cities with a sales price of over $3,000,000 and commercial property in these cities with a sales price of over $2,000,000, will be subject to an extra transfer tax of 0.25% effectively increasing the state’s transfer tax rate to 0.65% with regard to such transactions.
Mansion Tax
The second transfer tax on real property exacted by New York State is the 1% Mansion Tax, which applies to sales of residential property where the consideration of the sales is over $1 million. The mansion tax is payable by the buyer unless stated otherwise.
Under the new law, the state-imposed tax was broadened when the sales price of the property reaches $2 million and continues rising until it reaches a top rate on sales of $25 million or more.
Flip taxes
The final set of taxes an individual may need to pay when selling a property in New York City is flip taxes.
A flip tax is a transfer fee paid by the seller to the building. Although it is significantly more common in co-ops, there are many condos in NYC that also have them. Flip Taxes Exist to Discourage Flipping and as a source of revenue. A flip tax is not precisely a tax as 100% of it goes to the building, not the government.
Based on research, the most common flip tax rate is 2% of the sales price.
How is a Flip Tax Calculated In NYC?
Essentially all flip taxes were calculated as a percentage of the sale price. But it could also be calculated as a percent of the owner’s capital gain, a fixed dollar amount per share, or an amount that declines the longer you hold the apartment
Who Pays The Flip Tax?
Unless otherwise agreed, the seller is expected to pay the flip tax.
Conclusion
Property transactions in New York City come with charges and taxes on either the buyer or the seller. In most cases, buying and selling property in NYC incurs multiple fees and taxes. Speaking with an expert about all the closing costs involved is an ideal way to get an accurate understanding of what you’ll be required to pay.
So whether you’re looking to buy or sell a specific property in NYC, talk with a professional. In other words, let’s go ahead and contact your Damalion expert now.
