What is the Transfer Tax in NYC and NYS Real Estate Purchases?
In New York, the transfer tax is a tax paid at closing on residential property, signaling the transfer of the title and ownership from one party to another.
The full term is the Real Property Transfer Tax and applies to all residential property deals including condos and co-ops.
Typically, this tax is to be paid by the seller. However, if the seller is exempt or refuses, this cost is then passed onto the buyer.
Either way, the transfer tax will be paid by someone as local and state municipalities must be satisfied at the closing table or there is no deal.
Be very clear, both New York State and New York City have their own transfer taxes imposed on each of these real estate deals occurring within in the five boroughs.
If you are purchasing in another city or town in the state, they may or may not also impose their own transfer tax.
All-in-all, your budget should be carefully calculated before you start house hunting or selling because closing costs go far beyond mortgages, down payment, attorney and broker fees.
Find out more about on how you can ready yourself for your home purchase.
How Much is the Transfer Tax?
Keep in mind that the transfer tax rate is different for both the city and the state.
For all residential transactions from $499,999 and less, New York City collects 1% on the sale price.
For transactions that are $500,000 and higher, that rate goes up to 1.425%.
The state passed new transfer taxes in April 2019. Any residential sale below $3 million will remain at the already established 0.4%. Deals from $3 million and up will got up to 0.65%.
So, for a condo selling at $325,000, the transfer tax would come out to $3,250 for just the city and $1,300 for the state--making your grand total $4,550 for just transfer taxes.
At a price point of $4,140,000, $58,995 is due in for the city and $26,910 for the state. The grand total for transfer taxes ends up being a whopping $85,905.
Can a Seller Force Me to Pay the Transfer Taxes?
In essence, yes. He or she can if the negotiations work out that way.
In New York City, it's typical for a sponsor to pass on the transfer taxes to the buyer for new developments, specifically.
For one reason another, this has become common practice.
If the condo, co-op, or building is "hot", the seller may be able to demand that any buyer pay the transfer taxes at closing.
However, in a soft market or buildings where units are on the market for a long time, this can be an option for sponsors to explore. They may offer to pay half or all entirely.
You, in turn, can also offer a seller of a resale to pay for their transfer taxes as a bargaining chip to negotiate for items you want.
Some items you can bargain for are renovation or repairs to the property, for them to pay property taxes or common charges for the remainder of the year, or coming in at a lower offer.
Are There Any Other Taxes I Should Be Aware of?
You can expect other taxes in particular sales transactions due at closing.
For example, a sale of co-op will incur a flip tax. This tax is outlined in the bylaws of the co-op and vary from building to building.
The flip tax can be anywhere from 1%-3%, and can be implemented according to sales price or by shares.
You may even encounter this flip tax with certain condo boards.
Unlike the transfer tax, this tax is imposed and collected by the co-op or condo board and not by state or city government.
However, just like the city and state, a co-op board can nullify a sale if this fee is not paid.
Another tax to consider is the mansion tax for all residential transactions $1 million and up.
To find out greater details on how much you can incur for closing, read our article on the New York State mansion tax and what new changes have been made.
The mansion tax starts at 1% of the sales price in the $1-$2 million range.
That's why buying a property for $999,999 can make all the difference on whether you'll be paying an additional $10,000 or not at closing.
This mansion tax can go as high as 3.9% for residential property selling for $25 million and over--that's $975,000 and upwards!