The real estate transfer tax is one of the closing charges you’ll have to pay when you purchase a home or other piece of real estate. The state, county, or municipality where the real estate is located levies a transfer tax on the right to exchange real estate within its borders whenever there is an exchange of real estate. This basically means that a charge is paid to those supplying the jurisdiction in exchange for making the procedure lawful and legitimate. Real estate transfer taxes in New York are taxes imposed on the transfer of property ownership from one person or entity to another. These taxes are typically paid by the buyer of the property, but can also be paid by the seller in certain situations. The taxes are imposed at the state and local levels, with the state tax being 0.4% of the sale price and the local tax varying depending on the location of the property.
In this article, Eastcoastlaws.com will outline all you need to know about real estate transfer taxes in New York State.
What Is the Real Estate Transfer Tax Rate in New York?
The transfer tax in New York State is determined at a rate of $2 for every $500. For a $300,000 house, the real estate transfer tax, as example, would be $1,200. A mansion tax is also levied by New York State. Real estate transfer taxes are further charged at a rate of 1% on properties with sales prices of $1 million or more. Accordingly, a residence selling for $1 million has a 1.4% transfer tax.
The United States has various transfer taxes. For instance, Pittsburghers must pay 4% in transfer tax while Colorado residents pay 0.01%. Some states don’t have any transfer taxes at all, like North Dakota and New Mexico.
|NEW YORK STATE TRANSFER TAX RATES EXAMPLE COSTS*
|Transfer Tax Cost
- This assumes the NYS real estate transfer tax of $2 per $500 tax rate and 1% mansion tax for properties of $1 million or more.
- If you purchase real estate with a price of $3 million or more then you could incur an additional tax of $1.25 for each $500.
Who Pays the Real Estate Transfer Tax In New York?
In New York, the general rule is that the buyer is responsible for paying the real estate transfer tax. However, in some situations, the seller may be required to pay the tax. For example, if the property is being sold as a result of a foreclosure or a tax sale, the seller may be required to pay the transfer tax. Additionally, in some cases, the parties may negotiate who will pay the transfer tax as part of the purchase agreement.
In some cases, the parties may agree to split the transfer tax between them. This can be helpful for the buyer if they are facing a tight budget but still want to purchase the property, and for the seller, if they are looking to close the deal quickly and move on to other things.
It’s also important to consult with a real estate attorney or another professional advisor to understand the specific laws and regulations regarding the transfer taxes in the area where the property is located. They may also be able to advise on any exemptions or reductions that may be available, which could help to minimize the amount of tax that needs to be paid.
Who Is Exempt From Paying New York Property Transfer Tax?
In New York, there are certain exemptions and reductions available for the state and local property transfer taxes. These exemptions and reductions can apply to both buyers and sellers of property, and can help to minimize the amount of tax that needs to be paid. Some of the most common exemptions and reductions include:
- First-time home buyers: In New York, first-time home buyers may be eligible for a $3,000 exemption from the state property transfer tax. To qualify for this exemption, the buyer must not have owned a home in the state for at least three years prior to the purchase of the new property.
- Primary residence: In New York City, a $15,000 exemption from the local property transfer tax is available for properties that will be used as the primary residence of the buyer. To qualify for this exemption, the property must be a one- or two-family home, and the buyer must not have owned any other property in the city within the last three years.
- Family transfers: In New York, there are reductions available for properties that are transferred between family members. The amount of the reduction will depend on the relationship between the parties and the value of the property. For example, the transfer of property between siblings may be eligible for a 50% reduction in the local property transfer tax.
- Charitable or public uses: Properties that are being transferred for certain charitable or public uses may be eligible for a reduction or exemption from the property transfer taxes. For example, properties that are being transferred to a religious organization or for use as a school may be eligible for a reduction or exemption.
- Government entities: Government entities are usually exempt from paying property transfer taxes.
It’s important to note that these exemptions and reductions may vary by location and may also change over time. It is best to consult with a real estate attorney or another professional advisor to understand the specific laws and regulations regarding the property transfer taxes in the area where the property is located and to determine if any exemptions or reductions may apply to your specific situation.
How to File and Pay Your Real Estate Transfer Tax
Filing and paying your real estate transfer tax in New York involves several steps, including:
- Obtaining a Transfer Tax Return Form: Form TP-584 You will need to obtain a Transfer Tax Return Form from the appropriate tax authorities. This form can usually be obtained from the county clerk’s office or the city or town hall where the property is located.
- Completing the Transfer Tax Return Form: The Transfer Tax Return Form will require information such as the sale price, the names of the buyer and seller, and the address of the property. It’s important to ensure that all the information provided is accurate and up-to-date.
- Filing the Transfer Tax Return Form: Once the form is completed, it must be filed with the appropriate tax authorities within 90 days of the transfer of the property.
- Paying the Transfer Tax: The transfer tax is typically paid at the time of filing the return, however, in some cases, the tax may be paid in installments. It’s important to ensure that the appropriate amount of tax is paid and that payment is made in a timely manner to avoid any penalties and interest.
- Get the receipt: Once the transfer tax return is filed and the tax is paid, you will receive a receipt from the appropriate tax authorities. Keep this receipt in a safe place as it will be required to register the transfer of ownership with the county clerk.
It’s important to consult with a real estate attorney or another professional advisor to understand the specific laws and regulations regarding the property transfer taxes in the area where the property is located and to ensure that the filing and payment process is done correctly. If you’re interested in doing it yourself or are acting as your own agent you can find more information on the list of NYS real estate transfer tax forms and instructions.
When must all New York real property transfer taxes be paid?
Real property transfer taxes must be paid within 90 days of the transfer of the property. The transfer of ownership is not considered complete until the transfer tax return is filed and the taxes are paid. If the taxes are not paid within 90 days, penalties and interest may be imposed by the appropriate tax authorities.
It’s important to note that the 90 days period starts running from the date of the closing, at which the ownership of the property is transferred from the seller to the buyer. During this time, the parties involved in the transaction must file the transfer tax return and pay the taxes owed.
What You Should Know
You can be liable for various transfer taxes whenever you acquire or sell property in the state of New York. Depending on how much the real estate sells for, the amount and who is accountable will change. When the purchase price surpasses $1 million, the buyer is normally only responsible for the tax component of the price. You should consider this potential significant tax burden when purchasing or selling real estate in the state.
It’s also important to consult with a real estate attorney or another professional advisor to understand the specific laws and regulations regarding the property transfer taxes in the area where the property is located and to ensure that the filing and payment process is done correctly and in a timely manner.