Real estate transfer tax

Tax is computed at a rate of two dollars for each $500, or fractional part thereof, of consideration.

An additional tax (mansion tax) of 1% of the sale price applies to residences where consideration is $1 million or more.

Beginning on July 1, 2019, certain conveyances of real property or interests therein located in New York City (other than conveyances made pursuant to a binding written contract entered into on or before April 1, 2019) are also subject to the following taxes:

• A tax of $1.25 for each $500, or fractional part thereof, when the consideration for the entire conveyance of residential real property is $3 million or more (additional base tax);

• An additional base tax of $1.25 for each $500, or fractional part thereof, when the consideration for the entire conveyance of property other than residential real property is $2 million or more; and

• A supplemental tax on the conveyance of residential real property, or interest therein, when the consideration is $2 million or more. The tax rate is an incremental rate between .25% and 2.9% based on the purchase price. The rates are published in Form TP-584-NYC-I, Instructions for Form TP-584-NYC.

The base tax and additional base tax are paid by the grantor (seller), and such tax shall not be paid directly or indirectly by the grantee (buyer) except as provided in a contract between seller and buyer. However, if the seller doesn't pay the tax, or is exempt from the tax, the buyer must pay the tax.

In the case of the conveyance of residential real property, if the transfer tax is paid by the buyer pursuant to a contract between the buyer and seller, the amount of tax shall be excluded from the calculation subject to tax.

Where the buyer has the duty to pay the transfer tax because the seller has failed to pay, the tax becomes the joint and several liability of the seller and the buyer; provided that in the event of such failure, the buyer shall have a cause of action against the seller for recovery of payment of such tax by the buyer.  

The additional tax (mansion tax) and supplemental tax are paid by the buyer. If the buyer doesn’t pay the tax or is exempt, the seller must pay the tax.

In the case where the seller has the duty to pay the tax because the buyer has failed to pay, the tax becomes the joint and several liability of the seller and buyer.

• For conveyances of real property located outside New York City, file 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, with the county clerk where the property transferred is located. The form and payment of all applicable taxes are due no later than the 15th day after the delivery of the deed or similar legal document.

• File Form TP-584-NYC, Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certification of Exemption from the Payment of Estimated Personal Income Tax for the Conveyance of Real Property Located in New York City, for all real property conveyances in New York City.

• If the deed or document isn't being recorded, file Form TP-584 or TP-584-NYC and pay any tax due directly to the Tax Department no later than the 15th day after the delivery of the document. Mail Form TP-584 or TP-584-NYC with any attachments and payment to the address indicated on the form. If using a private delivery service, refer to Publication 55, Designated Private Delivery Service.

When a limited liability company (LLC) is the seller or buyer in a deed transfer of a building containing up to four family dwelling units, Form TP-584 or Form TP-584-NYC cannot be accepted for filing unless accompanied by documentation that identifies the names and addresses of all members, managers and other authorized persons of the LLC. If any member of the LLC is itself an LLC or other business entity, other than a publicly traded company, a REIT, a UPREIT, or a mutual fund, the names and addresses of the shareholders, directors, officers, members, managers and/or partners of that LLC or other business entity must also be provided until ultimate ownership by natural persons is disclosed.

The term authorized person means a person, whether or not a member, who is authorized by the operating agreement, or otherwise, to act on behalf of an LLC or foreign LLC.

The term natural person means a human being, as opposed to an artificial person, who is the beneficial owner of the real property. A natural person does not include a corporation or partnership, natural person(s) operating a business under a d/b/a (doing business as), an estate (such as the estate of a bankrupt or deceased person), or a trust.

Example: On September 16, 2019, RRP, LLC, a single-member LLC, is the seller in a deed transfer of a two-family house to an individual. RRP, LLC’s single-member is ABC Partnership. ABC Partnership has four individual partners and one partner, RRP2, LLC, that is a multiple-member LLC. RRP2, LLC has three individual members. Provide documentation for:

• all managers and other authorized persons of RRP, LLC;
• ABC Partnership;
• ABC Partnership’s four individual partners;
• RRP2, LLC;
• RRP2, LLC’s three individual members;
• all officers and directors of ABC Partnership; and
• all officers, directors, and managers of RRP2, LLC.

Nonresidents must compute the gain (or loss) from the sale or transfer of certain real property, including cooperative units, and pay any estimated personal income tax due. Nonresidents who don't qualify under one of the exemptions shown on Form TP-584 or TP-584-NYC, Schedule D must present one of the following forms to the recording officer or directly to the Tax Department at the same time Form TP-584 or TP-584-NYC is filed:

• IT-2663, Nonresident Real Property Estimated Income Tax Payment Form
• IT-2664, Nonresident Cooperative Unit Estimated Income Tax Payment Form

Certain governmental organizations or entities are exempt from the payment of the real estate transfer tax. In addition, certain types of conveyances are not subject to the real estate transfer tax or are exempt from only the additional tax (mansion tax).

Exempt governmental organizations or entities include:

• the State of New York, or any of its agencies, instrumentalities, political subdivisions, or public corporations (including a public corporation created pursuant to agreement or compact with another state or the Dominion of Canada);
• the United Nations; and
• the United States of America and any of its agencies or instrumentalities. 

However, if the exempt governmental entity conveys title to real property to a nonexempt individual or entity, the nonexempt grantee must pay the tax due. 

Nontaxable conveyances include those:

• to the United Nations, the United States of America, the State of New York, or any of its agencies, instrumentalities, political subdivisions or public corporations (including a public corporation created pursuant to agreement or compact with another state or the Dominion of Canada);
• used to secure a debt or other obligation;
• without additional consideration, that confirm, correct, modify, or supplement a prior conveyance;
• without consideration and otherwise than in connection with a sale, including conveyances as bona fide gifts;
• given in connection with a tax sale;
• conveyed to execute 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;
• which consist of a deed of partition;
• given pursuant to the federal Bankruptcy Act;
• 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;
• which convey an option or contract to purchase real property with the right to use or occupy such property where:
  • the consideration is less than $200,000;
  • such property or at least one unit of a two- or three-family house was used solely as the grantor’s personal residence; and
  • the real property consists of a one, two-, or three-family house, an individual residential condominium unit or the sale of stock in a cooperative housing corporation in connection with the grant or transfer of a proprietary leasehold covering an individual residential cooperative unit;
• conveying real property located in an approved tax-free NY area to businesses located in such areas that are participating in the START-UP NY program; and
• conveying real property on an Indian nation or tribe’s reservation between members of that Indian nation or tribe, a tribally-chartered corporation, or otherwise wholly-owned entity of that same reservation.

Conveyances exempt from the additional tax (mansion tax) only

Conveyances of real property for open space, parks, or historic preservation purposes to any not-for-profit tax exempt corporation operated for conservation, environmental, parks, or historic preservation purposes are exempt from the additional tax (mansion tax). 

Consideration - 

• In the case of additional tax (mansion tax), means the price actually paid or required to be paid for the real property, or interest in the real property, including the payment for an option or contract to purchase real property, whether or not expressed in the deed, and whether paid or required to be paid by money, property, or any other thing of value. It includes the cancellation or discharge of an indebtedness or obligation. It also includes the amount of any mortgage, purchase money mortgage, lien, or other encumbrance, whether or not the underlying indebtedness is assumed or taken subject to.
• In the case of (i) the original conveyance of shares of stock in a cooperative housing corporation in connection with the grant of a proprietary leasehold by the cooperative corporation or cooperative plan sponsor and (ii) the subsequent conveyance by the owner thereof of the stock in a cooperative housing corporation in connection with the grant or transfer of a proprietary leasehold for a cooperative unit other than an individual residential unit, consideration will include a proportionate share of the unpaid principal of any mortgage on the real property of the cooperative housing corporation comprising the cooperative dwelling or dwellings.  
• In the case of a transfer or acquisition of a controlling interest in any entity that owns real property, consideration means the fair market value of the real property or interest therein, apportioned based on the percentage of the ownership interest transferred or acquired in the entity.

Continuing lien deduction -The value of any lien or encumbrance remaining on real property, or interest therein after the conveyance is excluded from consideration, where the conveyance is either:

• a one, two or three-family house, or individual residential condominium unit, or
• any other real property where the consideration is less than $500,000.

Controlling interest - 

• In the case of a corporation, either 50% or more of the total combined voting power of all classes of stock of the corporation, or 50% or more of the capital, profits, or beneficial interest in the voting stock of such corporation; and
• in the case of a partnership, association, trust, or other entity, 50% or more of the capital, profits, or beneficial interest in the partnership, association, trust, or other entity.

Conveyance - the transfer or transfers of any interest in real property by any method, including but not limited to the sale, exchange, assignment, surrender, mortgage foreclosure, transfer in lieu of foreclosure, option, trust indenture, taking by eminent domain, conveyance upon liquidation or by receiver, or transfer or acquisition of a controlling interest in any entity with an interest in real property. Transfer of an interest in real property includes the creation of a leasehold or sublease only where (a) the sum of the term of the lease or sublease and any options for renewal exceeds forty-nine years, (b) substantial capital improvements are or may be made by or for the benefit of the lessee or sublessee, and (c) the lease or sublease is for substantially all of the premises constituting the real property. Conveyance of real property will not include a conveyance pursuant to devise, bequest or inheritance; the creation, modification, extension, spreading, severance, consolidation, assignment, transfer, release or satisfaction of a mortgage; a mortgage subordination agreement, a mortgage severance agreement, an instrument given to perfect or correct a recorded mortgage; or a release of lien of tax pursuant to the tax law or the internal revenue code.

Fair market value - the amount that a willing buyer would pay a willing seller for real property. It is generally determined by appraisal based upon the value of the real property at the time of the conveyance. It is not net fair market value, which is fair market value less the amount of any mortgages on the property.

Grantor (seller) - 

• The person making the conveyance of the real property or interest therein.
• In the case of a transfer or an acquisition of a controlling interest in an entity with an interest in real property, grantor means the entity with an interest in real property or a shareholder or partner transferring stock or partnership interest, respectively.

Grantee (buyer) - the person who obtains real property or interest therein as a result of a conveyance.

Interest in real property - includes title in fee, a leasehold interest, a beneficial interest, an encumbrance, development rights, air space and air rights, or any other interest with the right to the use or occupancy of real property, or the right to receive rents, profits or other income derived from real property. It also includes an option or contract to purchase real property. It does not include a right of first refusal to purchase real property.

Person - an individual, partnership, limited liability company (LLC), society, association, joint stock company, corporation, estate, receiver, trustee, assignee, referee or any other person acting in a fiduciary or representative capacity, whether appointed by a court or otherwise, any combination of individuals, and any other form of unincorporated enterprise owned or conducted by two or more persons.

Real property - every estate or right, legal or equitable, present or future, vested or contingent, in lands, tenements or hereditaments, including buildings, structures and other improvements thereon, which are located in whole or in part within the state of New York. It does not include rights to sepulture.

Residential Real Property - Any premises that is or may be used in whole or in part as a personal residence and shall include a one, two or three-family house, an individual condominium unit or a cooperative apartment unit.