In most Manhattan real estate transactions, the seller pays the NYC Real Property Transfer Tax (RPTT) and New York State base transfer tax. Certain high-value NYC conveyances may also trigger an additional base tax that defaults to the seller, while the mansion tax and New York State supplemental tax generally default to the buyer. Exemptions and contract terms can affect what each party personally pays, so the tax language should be reviewed before closing.
At Sishodia PLLC, Manhattan real estate attorney Natalia Sishodia helps buyers and sellers across New York City understand who owes transfer taxes and whether a valid exemption or contract term may reduce their personal cost. Our NYC deed transfers lawyer reviews purchase contracts before closing to confirm how each transfer tax is handled.
This guide explains who pays transfer tax in New York, when a buyer may cover a seller-paid tax, and which exemptions may reduce or eliminate the amount owed. Call Sishodia PLLC at (833) 616-4646 to schedule a consultation.
Who Pays the Transfer Tax in New York?
In NYC real estate transactions, the seller is responsible for paying the New York State base transfer tax and the New York City Real Property Transfer Tax. For certain high-value NYC conveyances, the seller also pays the NYS additional base tax by default. As a buyer, you typically do not pay these transfer taxes. However, you may become responsible if your contract shifts the cost to you, the seller is exempt, or the seller simply fails to pay.
Manhattan new construction buyers may face a different scenario with sponsor contracts. Some sponsor contracts require the buyer to cover the seller’s transfer taxes.
Contract language should be reviewed with the transfer tax return before closing. Sishodia PLLC can help confirm whether the contract shifts seller-paid taxes to the buyer and whether the return reflects that allocation correctly.
What Happens When a Buyer Pays the Seller’s Tax?
In a residential property transfer, any buyer-paid transfer tax required by the purchase contract is included in the total consideration used to calculate the taxes. Because the buyer is paying an obligation that legally belongs to the seller, tax authorities view this as additional payment for the property. This requires a “gross-up” calculation, which actually increases the total tax owed.
Buyers can also become responsible for the NYS base transfer tax or additional base tax if the seller is exempt or fails to pay. If a seller’s failure to pay forces the buyer to cover these state taxes, both parties become jointly liable. The buyer may then have a legal claim to recover that money from the seller. Similarly, the buyer can become liable for the NYC RPTT if the seller fails to pay or is exempt.
Sishodia PLLC can review whether buyer-paid taxes are handled correctly on the return and whether the contract supports recovering your money if the seller fails to pay.
Real Estate Attorney in Manhattan, Sishodia PLLC
Natalia A. Sishodia, Esq., LL.M.
Natalia A. Sishodia, Esq., LL.M., is a New York City real estate attorney serving clients in Manhattan and throughout the New York area. Her practice includes real estate law, business law, elder law, estate planning, and taxation, with a strong focus on high-end residential and commercial real estate matters. Also fluent in Russian, Ms. Sishodia works with domestic and international clients, including high-net-worth individuals, businesses, investors, and clients with cross-border legal needs.
Ms. Sishodia’s accomplishments include the Award for Outstanding Achievement in International Law, the Avvo Client’s Choice Award, and work with the United Nations Department of Economic and Social Affairs and the Convention on the Rights of Persons with Disabilities.
Who Pays the New York Mansion Tax in NYC?
The mansion tax and New York State supplemental tax for NYC residential property generally default to the buyer. If the buyer is exempt or fails to pay, the seller becomes liable. When a buyer’s failure to pay forces the seller to assume that liability, both parties may share joint responsibility.
The mansion tax is 1% of the consideration for residential real property when the amount is $1,000,000 or more. For residential property in New York City, the New York State supplemental tax begins at $2,000,000, with tiered rates ranging from 0.25% to 2.9% for sales of $25,000,000 and above.
New York State also charges an additional base tax on certain high-value NYC conveyances. This applies to residential properties when the consideration is $3,000,000 or more, and to non-residential properties of $2,000,000 or more. Like the standard base transfer tax, the seller pays this additional tax by default.
The table below shows how the default payer differs by tax type:
| Tax | Who Pays by Default | If the Default Payer Does Not Pay or Is Exempt |
|---|---|---|
| NYS base transfer tax and NYC RPTT | Seller (grantor) | Buyer may become liable; joint liability may apply when the seller fails to pay |
| Mansion tax (1% at $1M or more) | Buyer (grantee) | Seller may become liable; joint liability may apply when the buyer fails to pay |
| New York State supplemental tax for NYC residential property ($2M or more) | Buyer (grantee) | Seller may become liable; joint liability may apply when the buyer fails to pay |
| Additional base tax for certain high-value NYC conveyances | Seller (grantor) | Buyer may become liable; joint liability may apply when the seller fails to pay |
Because each tax has a different default payer, an experienced real estate attorney can compare the contract, property type, purchase price, and transfer tax return before closing to confirm how payment responsibility is handled.
What NYC Transfer Tax Exemptions Are Available?
Not every property conveyance triggers a transfer tax. New York Tax Law Section 1405 lists several exemptions, and NYC Administrative Code Section 11-2106 provides additional exclusions for the city’s RPTT.
The following types of conveyances may be exempt from the NYS transfer tax, the NYC RPTT, or both, depending on the transaction and the rule being claimed:
- Government-related conveyances: certain transfers involving government entities may be exempt from NYC RPTT, though filing and payment responsibilities can still depend on the parties and transaction structure.
- Security instruments: a deed given solely as security for a debt, or a deed returned solely to release that security.
- Confirmatory or corrective deeds: conveyances that confirm, correct, modify, or supplement a previously recorded deed, without additional consideration.
- Bona fide gifts: transfers of real property without consideration and not in connection with a sale. If the property carries a mortgage, the relief from that debt may count as consideration.
- Changes in form of ownership: conveyances that merely change the identity or form of ownership without changing beneficial ownership. This does not apply to conveyances to a cooperative housing corporation.
- Bankruptcy conveyances: deeds given pursuant to the federal Bankruptcy Act.
- Deeds of partition: conveyances that divide jointly owned property among co-owners.
Every exemption has specific requirements, and claiming one incorrectly can lead to penalties. For instance, a gift deed that transfers mortgage liability to the recipient might not be fully exempt. Under Tax Law Section 1401(d), that debt relief actually counts as consideration.
Sishodia PLLC can review the deed, consideration, mortgage treatment, and supporting documents to confirm whether the transaction fits the exemption being claimed.
Key Takeaway: Claiming an exemption incorrectly, such as treating a gift deed that also relieves mortgage debt as fully exempt, can trigger back taxes and penalties. Confirm the requirements before filing.
Which NYC Transfers Are Exempt or Reportable?
The United States government and its agencies, New York State, and New York State agencies or political subdivisions are usually exempt from paying RPTT. If one of those government entities transfers property to a non-government entity, the non-government party must file the RPTT return and pay the tax. A transfer to an exempt government body may still need to be reported, even when no RPTT is due.
Foreign governments, their representatives, or heads of diplomatic missions are also exempt, provided the premises are used exclusively for diplomatic or consular purposes. Any other use of the property can trigger tax liability.
Certain transactions are exempt from the tax but must still be reported on an RPTT return. This includes transfers involving the United Nations (or other international organizations with U.S. membership) and nonprofits formed exclusively for religious, charitable, or educational purposes. Additionally, the RPTT only applies to New York City property transfers exceeding $25,000. Transactions at or below this amount are not subject to the tax, though reporting requirements may still apply.
Can You Legally Reduce or Avoid the NYC Transfer Tax?
Legally reducing transfer tax in Manhattan usually depends on one of two issues: whether the transaction qualifies for a statutory exemption, or whether the contract shifts payment responsibility between the parties.
While a contract can alter who pays the cost, it does not eliminate a tax that is legally due. Before closing, make sure to confirm the following:
- Whether the transaction qualifies for a statutory exemption under Tax Law Section 1405 or NYC Administrative Code Section 11-2106, such as a bona fide gift, a corrective deed, or a partition deed.
- How the purchase contract allocates NYS base transfer tax, NYC RPTT, additional base tax, mansion tax, and the New York State supplemental tax for NYC residential property.
- Whether the transaction details, including consideration, mortgage treatment, and property type, line up with the statutory requirements.
An attorney can review your contract and the underlying documents to confirm the transaction actually meets the exemption you plan to claim.
Key Takeaway: A statutory exemption may reduce or eliminate transfer tax, while contract terms can shift who pays. The return should match the exemption claim, contract terms, and deal documents.
New York Real Estate Attorney for Transfer Tax Exemptions
Transfer taxes can change the final cost of a Manhattan purchase or sale. Contract and filing review can clarify which taxes apply, whether an exemption is available, and how payment responsibility is allocated.
Manhattan real estate attorney Natalia Sishodia has negotiated and closed many New York transactions. At Sishodia PLLC, she works with buyers, sellers, and investors to review purchase agreements, analyze transfer tax exemptions, and address transfer tax questions before closing.
Call Sishodia PLLC at (833) 616-4646 or contact us online to schedule a consultation. Our office is located at 600 3rd Ave, 2nd Floor, New York, NY 10016, serving clients throughout Manhattan and New York City.
Frequently Asked Questions
Who pays the transfer tax in New York?
The seller usually pays the NYS base transfer tax and NYC RPTT in a New York City sale. The buyer may become responsible if the contract shifts that cost, the seller does not pay, or the seller is exempt.
Does the buyer ever pay the NYC transfer tax?
In some Manhattan new construction deals, the sponsor contract requires the buyer to cover seller-paid transfer taxes. When this happens, the tax amount paid by the buyer is added to the property’s purchase price as additional consideration, which increases the final tax calculation base. The buyer may also become liable if the seller fails to pay or is exempt.
Who pays the mansion tax in New York City?
The buyer usually pays the mansion tax. For NYC residential property, the buyer also generally pays the New York State supplemental tax when it applies. If the buyer fails to pay or is exempt, the seller may become responsible.
What transactions are exempt from the NYC transfer tax?
Some transfers may be exempt from the NYS transfer tax, NYC RPTT, or both. Common examples include certain government-related transfers, deeds given only as security, corrective deeds, bona fide gifts, certain changes in form of ownership, bankruptcy conveyances, and partition deeds. Some exempt transfers may still need to be reported.
Is a gift of property subject to transfer tax in New York?
A true gift made without any payment or consideration may qualify for an exemption. However, if the property has a mortgage and the transfer relieves the giver of that debt, the debt relief counts as consideration and may be taxed.
What is the minimum amount that triggers the NYC RPTT?
NYC RPTT generally applies when the sale or transfer amount is more than $25,000, unless an exemption applies. A return may still be required even when no tax is due.
