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This 4-bed/6-bath condo at One West End has a monthly tax of just $356 thanks to a running 421-A Tax Abatement This 4-bed/6-bath condo at One West End has a monthly tax of just $356 thanks to a running 421-A Tax Abatement
If you’re selling an NYC property, you’ll likely realize a strong return on your initial investment. But before you start planning how to spend your profits or reinvestment, it is important to consider the substantial closing costs you’ll also incur. In New York City, closing costs not only include brokerage fees but also include transfer taxes. In the wake of Tax Day, which was readjusted to May 17 due to the coronavirus pandemic, we take a look at the different types of transfer taxes that apply to sellers in New York City—the NYC transfer tax known as the Real Property Transfer Tax (RPTT), New York State transfer tax, and in the case of co-ops, an additional flip tax may be levied against you.

NYC transfer taxes

 

As outlined by the NYC Department of Finance, the Real Property Transfer Tax (RPTT) is applied to sales, grants, assignments, transfers, or surrenders of real estate in New York City whenever 50 percent or more of the ownership is transferred and that transfer is worth $25,000 or more. There are a few exceptions to this rule—for example, the United States Government and its agencies are exempt. In addition, while inherited properties are exempt from the NYC transfer tax, they must still be reported on any RPTT returns. If an inherited property is subsequently sold, however, all transfer taxes still apply.

 

The amount one pays depends on the value and type of property. In most residential transfers of property (this includes one- to three-family homes, co-ops, and condos), if the value is $500,000 or less, the rate is 1 percent of the sale price. If the value is more than $500,000, the transfer tax rate is 1.425 percent. Other types of property transfers, including multi-unit dwellings have different rates: 1.425 percent for properties worth $500,000 or less and 2.625 percent for those valued at more than $500,000.


New York State transfer taxes

 

New York City sellers not only pay a local transfer tax but also a statewide tax. As outlined by the New York State Department of Taxation and Finance, a real estate transfer tax is imposed whenever a sale exceeds $500. The tax rate is calculated at a rate of two dollars for each $500, or fractional part thereof. At present, an additional tax of 1 percent of the sale price applies to residences over $1 million or more. But as of July 1, 2019, a new set of guidelines came into effect: New York City properties worth over $2 million became subject to new tax rules and additional transfer taxes. The additional transfer taxes will be paid by the seller.

 

Notably, these transfer taxes are separate from the mansion tax, which is typically paid by the buyer. New York buyers were already required to pay a tax of 1 percent on home purchases of $1 million or more before it was passed, but now there are nine progressive tiers that range from 1 percent for homes from $1 million to 4.15 percent on homes $25 million and up.

Photo via Pixabay

Flip taxes

 

This brings us to the final set of taxes one may need to pay when selling a property in New York City. These taxes are generally known as “flip taxes.” Flip taxes can be as high as 20 percent of the sale price of a property, and they generally only apply to co-ops. This reflects the fact that flip taxes are designed to prevent owners from frequently flipping their units—a practice that can have an impact on a building’s culture or demographic.

 

Flip taxes can be determined in several different ways. First, the flip tax can be calculated as a percentage of the gross sale price (e.g., 5 percent or 15 percent of the sale price). Second, it can be a set dollar amount per co-op share owned. Third, there can be a flat flip tax fee (e.g., $3000). Finally, in some cases, co-ops use a hybrid model (e.g., a combination of a flat fee and amount per share).


What this means for a typical New York City seller

 

If you’re selling a property in New York City, chances are, you’re going to pay more than you would like to in taxes. Assuming your property is worth more than $500,000, you’ll need to be prepared to pay at least 1.425 percent in local transfer taxes, $2 on every $500 in state taxes, and if the unit is a co-op, you’ll likely also face a flip tax, which may range from a nominal fee of $500 to as much as 20 percent of the value of the unit. And if you plan to sell your city apartment and commute to work from a suburban location, heads up: A recent Wall Street Journal article noted New York taxes the income of nonresidents if it is derived from New York sources, including wages paid to commuters who work remotely out of convenience rather than necessity.

In the end, this combination of taxes can and often does eat into one’s return on investment. This is one reason why in New York City, renting remains more affordable than buying unless you plan to hold your property for at least 12 years. At that point, even with the city’s high transfer taxes, you’re statically likely to yield a high return on your investment.

The Caledonia View The seller of this condo with this view in the Caledonia will cover taxes and common charges for a full year


Listings with Special Sponsor Tax Incentives

From the Listing: *NO CARRYING COSTS FOR FIRST YEAR OF OWNERSHIP | SELLER TO COVER COMMON CHARGES AND TAXES* Incredible opportunity to steal an apartment at the crossroads of Chelsea, The West Village, The Meat Packing District, and minutes to Chelsea Market, Hudson River Park and Chelsea Piers. The Caledonia is positioned at the nexus of culture, entertainment and convenience. Priced with investors in mind, this unit is Investor and pied--terre friendly. Common charges are kept to a minimum because of the hybrid condo/rental design and excellent location. See floor plan and full details here.

1126-Lafayette-Avenue-01 All images of 1126 Lafayette Avenue via Compass
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From the listing: FOR A LIMITED TIME ONLY: SPONSOR WILL PAY FULL NYC & NYS TRANSFER TAXES. THE LAST SOUTH FACING UNIT AVAILABLE! Residence 4A is a duplex two-bedroom, two-bathroom home with a balcony and private roof terrace. Spanning across 900+ square feet of interior space, and 334 exterior square feet with beautiful open sky and Manhattan views. Bathrooms are finished with deep soaking tubs, stand-up glass stall showers, floating Duravit toilets and custom tile-work. Additional features of this property include video intercom, a landscaped common garden, rooftop, and bike storage. See floor plan and full detals here.

206-East-95th-Street-01 All images of The Omni via Corcoran
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From the listing: Residence 1A is a magnificent, fully renovated, brand new two-bedroom two-bathroom at 206 East 95th Street that offers endless possibilities. No cost has been spared in the creation of this wonderful Upper East Side home. From its open concept, incredibly high ceilings, hardwood floors throughout and refined finishes. The grandness of this home extends to its private, fenced-in expansive 24’ by 23’ backyard perfect for so many settings including entertaining, a play yard, or simply relaxing on a sunny day away from the hustle and bustle. See floor plan and full details here.

2903-Frederick-Douglass-Boulevard-01 All images of Be.Live Harlem Condominiums via Corcoran
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From the listing: This impeccably designed penthouse features a one-of-a-kind design- a two beds, two baths duplex with space for an at-home office and dramatic high ceilings. Enjoy the oversized windows, modern fixtures and red oak hardwood floors. The open kitchen includes premium stainless steel Bertazzoni appliances and gorgeous custom white shaker cabinetry, and arctic white quartz counter tops complemented by matte black hardware. See floor plan and full details here.

304-West-89th-Street-01 All images of 304 West 89th Street via Corcoran
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From the listing: This beautiful 2-bedroom, 1-bath home on a quintessential tree-lined street was recently gutted and renovated to an extremely high standard. Reduced to the wall studs, this property received all new electrical, floorings, fixtures, cable outlets, you name it! Upon entering the combined living/dining room you notice the warm hardwood floors, generous double windows and charming translucent French doors which lead to one of the two large bedrooms. See floor plan and full details here.

250-West-89th-Street-01 All images of Savannah via Akam Sales and Brokerage
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From the listing: Welcome to this spacious, split 2-bedroom, 2-bath home with separate dining area and convenient pass-through galley kitchen. This super flexible condop allows unlimited subletting, pied-a-terres, pets and NO BOARD APPROVAL! Facing east and west, you get the best of both worlds - morning light and late day sunsets. The galley kitchen is in excellent condition and features custom wood cabinetry, stainless appliances and granite counters. The additional dining area can easily be flexed into a convenient home office and there is tremendous closet/storage space. Two marble baths complete the picture. See floor plan and full details here.

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Contributing Writer Cait Etherington Cait Etherington has over twenty years of experience working as a journalist and communications consultant. Her articles and reviews have been published in newspapers and magazines across the United States and internationally. An experienced financial writer, Cait is committed to exposing the human side of stories about contemporary business, banking and workplace relations. She also enjoys writing about trends, lifestyles and real estate in New York City where she lives with her family in a cozy apartment on the twentieth floor of a Manhattan high rise.