Nothing is ever simple, especially not calculating taxes in NY. That is particularly true of taxes on real property transactions. There are a various taxes – both city and state – paid on real estate transactions in New York including transfer and mortgage taxes. Just ask Google. Their purchase last December of a building in Manhattan for $1.8 Billion generated $54,450,000 in transfer taxes. And calculating those transfer taxes can be — well — taxing, pardon the pun.
New York State Real Property Transfer Tax
A New York State Real Property Transfer Tax is imposed on each and every conveyance of real property from a grantor to a grantee, when the consideration exceeds $500. The consideration includes the price actually paid, or required to be paid, and the cancellation or discharge of an indebtedness or obligation. The tax is computed at a rate of two dollars for each $500 of consideration or fraction thereof.
An additional tax is imposed on the conveyance of residential real property, where the consideration for the entire conveyance is one million dollars or more. A transfer tax is also imposed on the transfer of a controlling interest in an entity that owns real property. The transfer of a controlling interest in the entity occurs when a person or group of persons acting in concert, transfer or acquire a total of 50% or more of a Corporation, Partnership, Association, Trust or other entity, within a three-year period. In the case of a conveyance of a 1–3 family house or a residential condo unit, the taxable consideration shall exclude the amount of mortgages remaining thereon at the time of the conveyance.
There is an examination period beginning six months prior to, and ending three months after, the transfer is established. Mortgages placed within the examination period, will be excluded, unless the facts indicate that the mortgage was placed in connection with the transfer.
New York City Real Property Transfer Tax
A New York City transfer tax is also imposed on the conveyance of real property. Where the conveyance is a residential 1-3 family house, coop or condo unit, and the consideration is $500,000 or less, the tax rate is 1% of the consideration. Where the consideration is greater than $500,000, then it is 1.425% of the consideration. For transfers involving property other than the residential properties listed above, and the consideration is $500,000 or less, the tax rate is 1.425% of the consideration. Where the consideration is more than $500,000, then the tax rate is 2.625% of the consideration.
Transfers that are a mere change of identity or form of ownership are not taxable to the extent that the beneficial ownership of the real property remains the same. A religious or not-for-profit corporation must pay a transfer tax at the state level. However, a transfer by or to an eligible, tax-exempt organization is exempt from the city real property transfer tax. To be eligible, an organization must be operated exclusively for religious, charitable or educational purposes, and must provide proof of the organization’s tax exempt status. The organization must provide copies of any letters granting an IRS or New York State sales tax exemption, or New York City exemption, and attach and affidavit stating whether such an exemption remains in effect.