Accountants who are advising their clients in real estate transactions should always consider transfer tax implications. There are State transfer taxes as well as taxes imposed by the City of New York, some counties and towns. These taxes are paid at the time of the closing or recording of deed.
The New York State Real Estate Transfer Tax is imposed on each conveyance where consideration exceeds $500. The tax rate is $2.00 for each $500 of consideration or fractional part thereof. However, this tax may be $1.00 per $500.00 of consideration for certain qualified transfers to Real Estate Investment Trusts. This is an important factor for accountants to investigate for clients.
In calculating the taxable consideration, the value of liens and other encumbrances remaining on the premises after conveyance are deducted for transfers involving a 1, 2 or 3 family house or individual residential condominium units, where the consideration is less than $500,000.
Transfer of “Real Property” also includes individual cooperative units as per Section 1401(d) of Tax Law. The consideration in this area excludes the value of liens on the stock or proprietary lease and the underlying mortgage on the cooperative building.
State Transfer Tax is usually paid by the grantor (seller) but sometimes can be negotiated. It is important to note that if the grantor is exempt from the tax or fails to pay same, the grantee (buyer) is responsible for the payment.
Other examples of where a transfer tax is due would be foreclosure sales where the successful bidder is the mortgagee (lender) and where the purchaser at the foreclosure sale is not the lender.
There is also a “mansion tax” of 1% in New York State on most residential properties of $1,000,000 or more. The “mansion tax” is payable by the grantee unless the grantee is exempt in which case the tax is payable by the grantor. Accountants should be aware that this tax is in addition to New York State Transfer Tax.
The New York City Real Property Transfer Tax (NYC RPT) is imposed on transfer of ownership by deed or sale of a cooperative apartment. The transfer tax is payable by the grantor unless otherwise negotiated. The 1% NYC RPT is imposed whenever the consideration exceeds $25,000. The tax rate is higher for commercial or multiple dwellings, and transfers over $500,000.
If the property lies in one of the counties outside of New York City, a county transfer tax may be due. We suggest that accountants contact the local County Clerk’s/Register’s office for information.
Transfer taxes are complex and require accountants to review each case thoroughly. If you have any questions or require more detailed information about transfer taxes contact Anthony Chellino, President of Prestige Title Agency at (718) 256-2726.
This Monthly Technical Advisory has been provided by Anthony Chiellino, President of Prestige Title Agency, Inc., a member of the National Network of Accountants Preferred Provider Network. Prestige Title has been providing title insurance and related services throughout the state for more than 15 years.
The National Network of Accountants is a leader in the training and development of accountants in the field of personal financial planning. For more information on National Network of Accountants call (800) 234-PLAN.