When you buy a home or other piece of real estate, you’ll have to deal with a certain taxes and closing costs. Real estate transfer tax is one of these costs. Whenever there is an exchange of real estate, the state, county or municipality in which the real estate is located charges a transfer tax on the privilege of transferring real property within the jurisdiction. What this basically means is that in exchange for making the process legal and official, a fee is paid to those providing the jurisdiction. Another example of this type of tax is the fee for registering a motor vehicle.
What is the real estate transfer tax rate in New York?
In New York State, the transfer tax is calculated at a rate of two dollars for every $500. For instance, the real estate transfer tax would come to $1,200 for a $300,000 home. New York State also has a mansion tax. Properties with sales prices of $1 million or more are subject to an additional real estate transfer tax of 1%. That means a home that sells for $1 million is has a transfer tax of 1.4%.
Transfer tax differs across the U.S. For example, Colorado has a transfer tax rate of 0.01% while people in Pittsburgh have to deal with a 4% rate. Some states, such as North Dakota and New Mexico have no transfer tax at all.
|New York State Transfer Tax Rates Example Costs*|
|Home Price||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.
Who pays the real estate transfer tax?
In New York, the seller of the property is typically the individual responsible for paying the real estate transfer tax. However, if the seller doesn’t pay or is exempt from the tax, the buyer must pay. The buyer is usually responsible for the 1% additional real estate transfer tax on properties worth $1 million or more. That said, if the buyer is exempt, the seller must pay. Whatever the situation – whether the buyer or seller pays – New York requires the full tax amount be paid.
Some states have a set of transfer tax laws that may include exemptions based on an individual’s buying status or income level. In Maryland for example, certain first time buyers are exempt from a percentage of the total, or a portion of the property’s sale price could be excluded from taxation. While in Washington D.C., the 2.2% is split between the seller and the buyer.
Who is exempt from paying New York property transfer tax?
According to New York state tax law, Article 31-D, Section 1449-EE, the following situations are exempt from the responsibility of paying real estate transfer tax:
- Conveyances which are or were used to secure a debt or other obligation
- Conveyances which, without additional consideration, confirm, correct, modify or supplement a deed previously recorded
- Conveyances of real property without consideration and otherwise than in connection with a sale, including deeds conveying realty as bona fide gifts
- Conveyances given in connection with a tax sale
- Conveyances to effectuate a mere change of identity or form of ownership or organization where there is no change in beneficial ownership, other than conveyances to a cooperative housing corporation of the real property comprising the cooperative dwelling or dwellings
- Conveyances which consist of a deed of partition
- Conveyances given pursuant to the federal bankruptcy act
- Conveyances of real property which consist of the execution of a contract to sell real property without the use or occupancy of such property or the granting of an option to purchase real property without the use or occupancy of such property
- Conveyances of real property, where the entire parcel of real property to be conveyed is the subject of one or more of the following development restrictions:
- agricultural, conservation, scenic, or an open space easement
- covenants or restrictions prohibiting development
- a purchase of development rights agreement
- a transfer of development rights agreement, where the property being conveyed has had its development rights removed
- said real property is subject to the development restriction of an agricultural district or individual commitment, pursuant to article twenty-five-AA of the agriculture and markets law
- real property subject to any locally adopted land preservation agreement, provided said exemption is included in the local law imposing the tax authorized by this article
- Conveyances of real property, where the property is viable agricultural land as defined in subdivision seven of section three hundred one of the agricultural and markets law and the entire property to be conveyed is to be made subject to one of the development restrictions provided for in subparagraph two of paragraph (j) of this subdivision provided that said development restriction precludes the conversion of the property to a non-agricultural use for at least three years from the date of transfer, and said development restriction is evidenced by an easement, agreement, or other suitable instrument which is to be conveyed to the town simultaneously with the conveyance of the real property
- Conveyances of real property for open space, parks, or historic preservation purposes to any not-for-profit tax exempt corporation operated for conservation, environmental, or historic preservation purposes.
- Conveyances of real property to any tax exempt corporation, incorporated pursuant to the not-for-profit corporation law or the private housing finance law, where such conveyance is for the purposes of providing affordable housing opportunities within the towns and such corporation is incorporated for the purposes of providing housing opportunities. For the purposes of this paragraph, “affordable housing” shall mean housing opportunities exclusively for town residents of the towns whose income is at or below the median income for the town.
- In the towns of East Hampton, Shelter Island and Southampton, an exemption of two hundred fifty thousand dollars shall be allowed on the consideration of the conveyance of improved real property or an interest therein and an exemption of one hundred thousand dollars shall be allowed on the consideration of the conveyance of unimproved real property.
- In the towns of Riverhead and Southold, an exemption of one hundred fifty thousand dollars shall be allowed on the consideration of the conveyance of improved real property or an interest therein and an exemption of seventy-five thousand dollars shall be allowed on the consideration of the conveyance of unimproved real property.
- Primary residential property purchased by one or more persons, each of whom is a first-time homebuyer shall be exempt from the payment of the real estate transfer tax, in the towns of Southampton, East Hampton, Shelter Island and Southold, provided that:
- in the towns of Southampton, East Hampton and Shelter Island, the primary residential property is within one hundred twenty percent of the purchase price limits defined by the state of New York mortgage agency low interest rate mortgage program in the non-target one family categories for Suffolk county in effect on the contract date for the sale of such property
- in the town of Southold, the primary residential property is within sixty percent of the purchase price limits defined by the state of New York mortgage agency low interest rate mortgage program in the non-target one family categories for Suffolk county in effect on the contract date for the sale of such property
- The buyer’s household income does not exceed the income limits defined by the state of New York mortgage agency low interest rate mortgage program in the non-target, one and two person household category for Suffolk county in effect on the contract date for the sale of such property.
Note: Exemptions are granted “only upon application by the owner of such building on a form prescribed by the town. The application shall be filed with the town. If satisfied that the applicant is entitled to an exemption pursuant to this section, the town shall approve the application and the conveyance of such primary residential property shall be exempt from the real estate transfer tax imposed by this article.”
How to File and Pay Your Real Estate Transfer Tax
Form TP-584 “Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certification of Exemption from the Payment of Estimated Personal Income Tax” should be filed with the county clerk where the property is being sold and is due no later than the 15th day after the delivery of the deed. In general, your realtor, lawyer and/or title company or broker will help you pay the necessary closing costs, include this tax. 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.
There are a number of things to consider if you’re thinking about buying in New York state:
- Mortgage rates can vary depending where you’re buying a home. Take a look at New York State’s mortgage rates to see if they’re in the ballpark of what you’re looking to pay.
- If you’re moving from out-of-state, you might be shocked by the Empire State’s high taxes. Try our New York income tax calculator to see how your paycheck will change once you move.
- Another budget concern is New York property taxes, which are some of the highest in the nation. Before buying a home, you’ll need to make sure you can afford the significant taxes.
- If you want help with this or any other big financial decisions, consulting a financial advisor might be a good idea. A matching tool like SmartAsset’s can help you find a person to work with to meet your needs. First you answer a series of questions about your situation and your goals. Then the program narrows down thousands of advisors to up to three financial advisors who meet your needs. You can read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while we do most of the hard work for you.
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