If you're asking, do you pay taxes when selling a house in NY, the short answer is: yes, most probably.
The longer (and more annoying) answer is: it depends.
What taxes are we talking about?
Capital gains tax (state and federal)
NY State transfer tax
Mansion tax (yes, even if your place isn't a mansion)
Local transfer taxes etc, etc.
1- Capital gains tax: The one everyone fears
If you sell your home for more than you bought it, that profit is called a capital gain.
And yes, you may have to pay taxes on that gain. But NOT always.
Here's how it works:
If you lived in the house for at least 2 out of the last 5 years, you may be able to exclude up to $250,000 of profit from taxes ($500,000 if you're married).
That means if you bought your home for $300,000 and sold it for $550,000, you probably won't owe any capital gains tax.
But if you sold it for $700,000, then you might owe taxes on the $200,000 above your exemption.
Some people think they automatically pay tax on the full sale price. THAT'S NOT TRUE!
You're only taxed on the gain. (And even then, you might be exempt)
So, do you pay taxes when selling a house in NY? If you've lived there long enough and the profit isn't massive, you might not.
But if it was a rental property or you sold it too soon, the IRS might want their share.
And in Bronx, New York, state capital gains tax adds salt to the wound.
You're looking at up to 8.82% for state (plus federal rates that go up to 20%, and sometimes 23.8% with the net investment income tax). Fun!
PRO TIP: Keep receipts for improvements you made. Those costs can reduce your gain.
Capital Gains Tax for Nonresidents
Nonresident individuals are subject to New York State income tax on gains derived from the sale of real property located within the state.
Nonresidents must file Form IT-2663, "Nonresident Real Property Estimated Income Tax Payment Form," at the time of closing.
This form is used to estimate and remit any taxes due on the gain from the sale.
Similarly, the estimated tax is calculated at a rate of 8.82% on the gain realized from the sale.
Example:
If a nonresident sells a property in New York for $500,000, realizing a gain of $200,000, the estimated tax due at closing would be:
$200,000 (gain) × 8.82% (tax rate) = $17,640
This amount should be submitted with Form IT-2663 at the time of closing.
Do you pay taxes when selling a house in NY IF it's an investment property?
Let's say you didn't live in the home. Maybe it was a rental or a second home.
If it's not your primary residence, you don't get the $250K/$500K capital gains exemption.
So the whole profit is taxable!
For example:
You bought a rental for $400,000
You sell it for $600,000
You spent $20,000 on upgrades
Your gain is $180,000. That full amount is taxable.
Also, you might have to deal with something called depreciation recapture. If you claim depreciation on the property over the years, the IRS wants a cut of that when you sell.
2- Transfer taxes in Bronx, New York
Another angle to this: transfer taxes in Bronx, New York.
These are not based on your profit but on the price of the home.
-The tax is calculated at a rate of $2 for every $500 (or fractional part thereof) of the sale price.
-For example, if a property sells for $550,000, the tax would be calculated as if the price were $600,000. Resulting in a $2,400 tax (since the tax applies to each $500 or part of it).
If your property is in the city, you might also have to pay a New York City Real Property Transfer Tax (RPTT). This adds:
1.425% for properties under $500,000
2.625%% for properties over $500,000
If your house sells for $600,000 in NYC, you're looking at $15,750 in transfer taxes (state + city combined).
Who usually pays? In New York, it's common for the seller to pay the transfer tax. BUT it can be negotiated. In a hot market, buyers may agree to cover it.
3- Special taxes for expensive homes
Selling a luxury property? In New York, that could trigger additional taxes.
Homes that sell for $1 million or more are hit with what's known as the "mansion tax."
It starts at 1% and increases with the sale price.
Here's the breakdown:
$1M to $1.99M: 1%
$2M to $2.99M: 1.25%
$3M to $4.99M: 1.5%
$5M to $9.99M: 2.25%
$10M to $14.99M: 3.25%
$15M to $19.99M: 3.5%
$20M to $24.99M: 3.75%
$25M or more: 3.9%
So if you're selling a $3 million property in NYC, your mansion tax would be $45,000.
Are there any ways to avoid taxes when selling a house in NY?
Here are a few ideas:
1. Make it your primary home: If you're planning to sell, and the home isn't your primary residence, think about moving in for 2 years BEFORE selling. That could unlock the capital gains exclusion.
2. Keep records: Track every dollar you spend on improvements. New roof? Kitchen remodel? Landscaping?
3. 1031 Exchange (for investors): If it's an investment property, you might defer taxes by reinvesting the money in another property (using a 1031 exchange.)
4. Time your sale: If you're close to hitting that 2-year mark as a resident... wait. Don't sell yet! It could save you thousands.
5. Gift or inherit smartly: There are tax strategies around gifting property or passing it to heirs. But that's advanced stuff. Definitely talk to an expert before going this route.
So yes, you pay taxes when selling a house in NY, but there are ways to be smart about it.
Scenario: Selling a home in Bronx County. Do you pay taxes when selling a house in NY?
Let's say John, a homeowner in Bronx County, NY, has lived in his house for 5 years.
He bought it for $300,000 and is now selling it for $ 600'000.
John has lived in the home as his primary residence for more than 2 years, so he qualifies for the capital gains exclusion.
Now, let's break down the taxes John will likely pay when selling:
1-Capital Gains Tax
Since John lived in the home for over 2 years, he can exclude up to $250,000 of profit if he's single (or $500,000 if he's married).
John's gain is $300,000 ($600,000 - $300,000).
Since his gain is under the $250,000 limit for single homeowners, John won't pay capital gains tax on the profit.
2. New York State Transfer Tax
New York State charges a transfer tax when selling property.
The rate in Bronx County is $2 for every $500 of the sale price.
For John's sale of $600,000, the calculation is:
$600,000 ÷ $500 = 1,200
1,200 × $2 = $2,400
So, John will owe $2,400 for the New York State Transfer Tax.
3. New York City Real Property Transfer Tax (RPTT)
Since John's home is in New York City, there's an additional transfer tax.
For homes over $500,000, the tax rate is 2.625%.
For John's sale of $600,000, the calculation is:
$600,000 × 2.625% = $15,750
So, John will owe $15,750 for the NYC Real Property Transfer Tax.
4. Total taxes John would pay
Here's the total breakdown:
Capital Gains Tax: $0 (since it's his primary home and his profit is under the exclusion limit)
NY State Transfer Tax: $2,400
NYC RPTT: $15,750
Total taxes owed = $2,400 + $15,750 = $18,150
To wrap it up!
Do you pay taxes when selling a house in NY?
Here's what you've learned from this article:
Yes, you might pay capital gains tax, but there are exclusions if it's your primary home.
Yes, you'll pay transfer taxes. Both at the state level and (if you're in NYC) local level too.
Yes, you'll pay more if it's a luxury property, thanks to the mansion tax.
If it's an investment property, you'll probably owe full capital gains tax (and maybe more.)
Foreign sellers face additional rules, including a big withholding.
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