The NYC transfer tax, also known as the NYC Real Property Transfer Tax (RPTT), is a tax that applies to all transfers of real property and cooperative shares over $25,000. The NYC transfer tax also applies when transferring a majority of the ownership in any corporation that owns NYC property. The New York City transfer tax was introduced back in 1959 when it was only 0.5% of the sales price. Today the rate is higher, as the city applies a 1% tax on any properties sold for less than $500,000, while properties sold for over $500,000 are subject to a 1.425% tax.
New York State also applies a 0.4% transfer tax on all properties. Additionally, in 2019, NYS imposed an additional 0.25% transfer tax on all properties above $3 million. That means the NYS transfer tax will be either 0.4% or 0.65%.
When combined with the NYC Real Property transfer tax, buyers can expect to pay a total New York transfer tax of between 1.4% and 2.075% depending on the price of the property.
Overall, this is pretty straightforward as virtually all properties in NY State will get hit with a 0.4% transfer tax, so the only question is whether or not you'll be paying the NYC transfer tax, and which tax rate you'll be subjected to on the city level.
|Property Type||Sale Price||NY State Transfer Tax||NYC Transfer Tax||Total Transfer Tax|
|NYC Condo||$2,000,000||0.4% or $8,000||1.425% or $28,500||1.825% or $36,500|
|NYC Co-op||$5,000,000||0.65% or $31,250||1.425% or $71,250||2.075% or $102,500|
|NYC Condo||$400,000||0.4% or $1,600||1% or $4,000||1.4% or $5,600|
|Long Island House||$1,000,000||0.4% or $4,000||None||0.4% or $4,000|
Typically, it's the seller’s responsibility to pay the New York transfer tax. However, one exception is sponsor sales in new developments, in which case the buyer will pay the transfer tax. So if you're buying a new apartment from the sponsor, be prepared to cover the transfer tax.
One other circumstance when buyers can get stuck with the transfer tax bill is if the tax authorities can’t find the seller. The city has to get paid, and if the seller were to skip town the buyer will be responsible for paying the tax.
New York transfer tax rates depend on the price of the property as well as its location. For example, if you're buying a home in New York City you will pay 1.4% for homes sold under $500,000, 1.825% for those that go for $500,000 to $2,999,999, and 2.05% for any property that sells for over $3,000,000. The only way not to pay this tax, with a few exceptions noted below, is if the property sold for less than $500.
Unfortunately, sellers are stuck paying the transfer tax barring a few exceptions. There is a good reason that the city allows so few of them. In 2018, New York City raised $1.775 billion thanks to the Transfer Tax, according to the Office of Management and Budget. The state of New York raised over $700,000,000 that year. As you can see, the NYS and NYC transfer taxes do their intended job of transferring big bucks out of people’s pockets and into government coffers.
Sometimes the New York City tax authorities, in their quest to fill city coffers, are enthusiastic in their pursuit of collecting transfer tax revenue. According to the Real Deal, a real estate trade publication, New York City’s Department of Finance sent out 5,600 Transfer Tax bills to people who had already paid it. While the city claimed it was all a mistake, some who received phone calls by the department threatening them with jail time or to have their salaries garnished weren’t so sure.
If you're wondering how to avoid paying the transfer tax, the truth is you likely cannot avoid it unless you're lucky to qualify for an exemption. And virtually nobody is exempt from paying NY transfer taxes except non-profit and government organizations.
New York Transfer Tax Exemptions
- If you are buying for or selling to a non-profit organization
- The property is used as collateral to secure a debt
- Buying for or selling to an international organization such as the UN. However, this organization must have the USA as a member
- Other government bodies that are exempt for some reason or another
The only way to minimize the transfer tax for sellers is through the use of a purchase CEMA, which is also known as a splitter. A purchase CEMA functions like an assignment of mortgage with the buyer taking over and consolidating your outstanding balance with their new loan. This creates a continuing lien reduction and can reduce your overall transfer tax liability by the amount of your outstanding mortgage.
While it’s challenging to avoid the transfer tax itself, there are ways for buyers and sellers to mitigate the cost and lower overall costing costs, thus making the Transfer Tax bit less painful.
For buyers purchasing a unit in a new development
Buyers are typically responsible for paying the transfer tax when buying in a new development condo building. But as with most things, this is negotiable, and often depends on market conditions. If there's low demand, developers will be desperate to offload their completed units. It’s expensive for them to carry the cost of these empty condos because they are paying for the monthly maintenance fees, taxes, and other expenses. Most developers do not like to reduce the price of their condos, but they sometimes will pick up a lot of the closing costs - including the Transfer Tax - to close a deal.
Another option for buyers is to offset the transfer tax with a commission rebate. There are plenty of great brokers who will rebate a buyer up to 2.25% of the purchase price, which can help cover the cost of the New York City transfer taxes.
Sell FSBO (For Sale By Owner) and offset Transfer Tax by reducing costly commissions
The median price of a condo or co-op unit in Manhattan is just shy of $1 million. That means a seller will pay roughly $60,000 in commissions to brokers and agents. Even reducing this by half may offset the cost of the transfer tax.
Instead of hiring a listing agent, sellers can list their property themselves for a small fee. It will appear in the MLS, or in Manhattan, the REBNY RLS, where all brokers and agents look for newly listed homes. Here at PropertyClub, we offer an assisted FSBO marketing platform where a seller can post their property and have it automatically syndicated and marketed on the relevant broker databases and over 30+ listing portals. Not using a listing agent will save a seller $30,000 on a $1 million condo.
Most buyers come with a buyer agent, so sellers may still have to pay 3% or $30,000 to them. However, some buyers come alone without a buyer agent. In those cases, the entire 6% or $60,000 remains in the seller’s pocket. This more than offsets the cost of both New York State and NYC transfer taxes.
If you're selling a property in New York, you should expect to pay the NYC transfer tax. When combined with the NY State transfer tax it will cost you between 1.4% to 2.075 of the sale price and will be one of your largest closing costs. It's also a fee that can't easily be avoided, so make sure you're prepared to pay it.