How to Avoid the NYC Transfer Tax?

If you are selling or buying real estate in NYC, closing costs add up. One of the biggest line items is transfer taxes. NYC and New York State charge transfer taxes for transferring title on most deals, including single-family homes, condos, and co-ops. If you are buying new construction, many sponsors shift these taxes to you in the contract.

A few exemptions exist, but they are narrow. There are also ways to structure a deal so that transfer taxes in NYC may be reduced. Keep an eye on the mansion tax too, which can add to the total when purchase prices cross certain thresholds.

You do not have to figure this out on your own. At Sishodia PLLC, our team of New York real estate attorneys can walk you through what applies to your deal and what options you have. Whether you’re a buyer or a seller, we can assist you with state and local transfer taxes. Call us today at (833) 616-4646 to schedule a consultation.

Who Pays Transfer Tax in NY

In most deals, the seller pays the transfer taxes. That is the default. If you are the buyer, you do not cover these taxes unless your contract clearly says you will. If the seller does not pay or is not required to pay, responsibility shifts to the buyer.

If you are the buyer and you agree to pay the seller’s costs, those payments usually count as additional consideration for transfer-tax purposes. For residential property, an important provision under Tax Law §1404(a) allows the seller’s New York State transfer tax to be excluded from consideration if the buyer pays it. This rule has been in effect since July 1, 2021. Other seller costs you pick up, including NYC RPTT, still get added to the consideration when the taxes are calculated.

If you cover a transfer tax because the other side failed to pay, both of you become equally responsible for that tax. Are you a buyer who paid a tax the seller should have paid? You can pursue reimbursement from the seller.

The mansion tax and the supplemental tax are usually on the buyer. If the buyer does not pay or is not required to pay, the seller becomes responsible. 

If the seller ends up paying a tax because the buyer failed to pay, both parties are equally responsible.

At What Point in a Real Estate Transaction Is Transfer Tax Payable?

When buying or selling property, understanding when certain costs are due is crucial for a smooth transaction. One important fee is the transfer tax, which is due at the closing or settlement of the property sale. This is the final step in the sale process, where legal ownership of the property shifts from the seller to the buyer.

Transfer taxes are included in the closing costs and are typically calculated based on the sale price of the property. In New York, transfer taxes are calculated using a combination of state and local rates. New York State’s base transfer tax is 0.4% statewide. For properties located in New York City, there is also an additional state transfer tax of 0.25% when the total consideration is at least $3,000,000 for residential property (and at least $2,000,000 for other property). The State rate becomes 0.65% in total for those transactions.

Additionally, New York City imposes its own Real Property Transfer Tax. For one-, two-, or three-family homes and individual condo or co-op units, the rate is 1% up to $500,000 and 1.425% above that. For most other property, the rate is 1.425% up to $500,000 and 2.625% above $500,000. Both buyers and sellers should be aware of these rates as they can significantly impact the overall closing costs.

Since the transfer tax is a mandatory part of the transaction, it’s important to account for this cost in your budgeting. This ensures that there are no surprises during the settlement, allowing both parties to finalize the sale with clarity and confidence. Being prepared for this expense can help make the real estate transaction smoother and more predictable for everyone involved.

Time Your Property Transfer Strategically

Timing matters. NYC charges a Real Property Transfer Tax that is calculated as a percentage of the price you agree to accept, and New York State adds its own transfer tax on top. In plain terms, the tax is based on the sale price in your official agreement, not on your profit. NYC’s RPTT varies by property type and price tier, while the State tax is generally 0.4% of the purchase price. Those percentages ride directly on the number you sell for.

A hot market is great for your sale price, but tougher on your taxes. As bidding wars drive up the final price, your transfer tax bill rises right along with it. In a place like NYC, a higher price can even push you into a new tax bracket, increasing your rate significantly. In short, the same market that boosts your profit also inflates your tax payment.

Patience can be a powerful strategy. If market indicators or seasonal trends suggest a better outcome later, waiting may lower your price-based taxes and result in a smoother closing.  Legislative timing also matters. New York has changed transfer tax rules before and tied them to specific effective dates and contract cutoffs. Planning your sale around these anticipated changes can directly reduce your tax liability.

It is recommended to work with a New York real estate attorney early. You can get help reading current NYC and State rate tiers, modeling tax at different price points, and pressure testing dates for contract signing and closing. Your attorney can monitor pending city and state proposals, coordinate with your agent and accountant, and build a sale timeline that fits both market conditions and your personal needs. That way, you can time your transfer strategically and keep more of your proceeds.

New York Real Estate Attorney – Sishodia PLLC

Natalia A. Sishodia, Esq., LL.M.

Natalia A. Sishodia, Esq., LL.M., is the Managing Partner of Sishodia PLLC and a New York City attorney known for individualized, solutions-driven counsel spanning real estate, business law, elder law, estate planning, and taxation. She regularly represents domestic and international clients, including individuals and families from Russia, Switzerland, Japan, Canada, the UK, UAE, India, Turkey, China, South Korea, Italy, France, Singapore, Bulgaria, and Ukraine. Trusted by high-net-worth clients, celebrities, businesses, and some of the nation’s largest mortgage lenders, Ms. Sishodia is valued for her calm and responsive guidance.

Focusing on high-end real estate transactions, she handles every phase of the deal, including condo and co-op purchases and sales, single- to multi-family homes, new developments, conversions, deed transfers, leasing, lending, and 1031 like-kind exchanges. She has negotiated and closed hundreds of New York transactions, earning a reputation for meticulous planning and truly “stress-free” closings. Her honors include the Award for Outstanding Achievement in International Law and the Avvo Client’s Choice Award.

Purchase CEMAs Can Help Reduce Transfer Taxes in NYC

Sellers in NYC can potentially reduce their transfer taxes through an agreement called a purchase CEMA. 

A purchase CEMA, or a consolidation, extension, and modification agreement, is an agreement between the seller and buyer. The buyer agrees to assume the balance of the seller’s mortgage and borrows any new money to make up the difference. Afterward, the buyer can then consolidate both mortgages together. How does this save on a New York City transfer tax?

How a CEMA Helps a NY Seller

A well-structured purchase CEMA can reduce transfer taxes for certain property types by keeping part of the seller’s existing mortgage in place. For New York State transfer tax, the “continuing lien deduction” excludes from consideration any lien that remains on the property after closing for (i) one-, two-, or three-family houses and individual condominium units; and (ii) other property only if total consideration is under $500,000. This deduction does not reduce the separate “mansion tax.”

New York City’s RPTT also allows an “excludible lien” for 1–3 family homes and individual condo or co-op units when the lien existed before the transfer and remains after closing. The Department of Finance applies a review window from six months before to three months after the transfer. A lien will typically lose its tax-excludable status if, during this period, the lender changes and the interest rate or loan term is altered by 10% or more.

In practice, with a purchase CEMA New York State transfer tax is computed on the equity (price minus any qualifying continuing lien) for the property types noted above. In NYC, RPTT is computed on equity only if the lien qualifies as an excludible lien under DOF rules; otherwise, NYC taxes the full price.

Here is a simple example. You buy for $1,000,000, and a $400,000 mortgage is assigned to you and left in place. New York State may tax the remaining $600,000. New York City will also tax $600,000 only if that mortgage counts as an excludible lien under the city rules. If not, the city taxes the full $1,000,000.

What is a Mansion Tax in NYC?

Here in New York City, there is an extra transfer tax called the mansion tax. It is charged on high-priced home sales. You will mostly see it on very expensive properties.

New York State’s mansion tax is simple. If the purchase price is $1,000,000 or more, the tax is 1% and it is paid by the buyer. If the buyer does not pay, the seller must, and both are jointly liable. At exactly $1,000,000, the bill is $10,000. It is not 2.5%.

Buying in NYC adds one more layer. There is a separate buyer-paid supplemental tax that kicks in at $2,000,000 and up. The rate is progressive, starting at 0.25% at $2,000,000 and topping out at 2.9% for very high-end deals at $25,000,000 and above.

Most people don’t consider the NYC Mansion Tax a concern when selling or buying a house. However, it is something that is important to keep in mind if you’re thinking of buying an NYC property.

If you want clear numbers for your situation, talk to a seasoned real estate attorney. A skilled lawyer may be able to help you identify potential pitfalls in the transaction and ensure that all the costs you are required to pay are calculated correctly. Sishodia PLLC may be able to assist you. Contact us today to schedule a consultation.