Understanding NYC’s Real Estate Taxes – What Buyers and Sellers Need to Know

Breaking Down the Numbers in the Big Apple

New York City’s real estate market is not just about navigating neighborhoods and property types—it’s also about understanding the taxes involved. Whether you’re buying or selling, taxes can significantly impact your financial planning. Here’s what you need to know to stay prepared.

Taxes for Buyers

1. Mansion Tax:

• This tax applies to residential properties priced at $1 million or more.
• The rate starts at 1% for properties priced at $1 million and increases incrementally for higher-priced properties.

2. Mortgage Recording Tax:

• Buyers taking out a mortgage for condos or townhomes are subject to this tax.
• The rate varies but can be approximately 2% of the loan amount.

3. Transfer Taxes:

• While typically paid by the seller, buyers in new developments or specific transactions may be responsible for the NYC and NY State transfer taxes.

4. Property Taxes:

• NYC property taxes are relatively low compared to other parts of the country.
• Rates depend on property classification (e.g., residential vs. commercial) and assessed value.

Taxes for Sellers

1. Transfer Taxes:

• Sellers must pay both NYC and New York State transfer taxes.
• Combined, these taxes typically total 1.825% for properties over $500,000.

2. Capital Gains Tax:

• If you sell a property for more than you paid, you may owe federal and state capital gains tax.
• Exemptions: If the property was your primary residence for at least two of the last five years, you may exclude up to $250,000 (single) or $500,000 (married) from taxable gains.

3. Flip Tax (Co-ops):

• Many co-ops charge a flip tax when a property is sold.
• This can be a flat fee or a percentage of the sale price, paid by the seller.

Tax Tips for Investors

• 1031 Exchange: Investors can defer capital gains taxes by reinvesting proceeds into a like-kind property.
• Depreciation: Property owners can deduct depreciation on rental properties, reducing taxable income.

Insider Tip:

Work with a knowledgeable real estate agent and a tax professional to understand your obligations and identify potential deductions. Tax laws can be complex, and proactive planning is key.

Stay tuned tomorrow for: Renovating in NYC – What You Need to Know Before You Start.

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All information contained within this document is intended for informational purposes only and is sourced from sources that are considered reliable. Although the information is believed to be accurate, it is presented subject to omissions, errors, modifications, or withdrawal without prior notice. This is not intended to solicit property that has already been listed. Equal Housing Opportunity.