New York—Miscellaneous Tax: Changes to Real Estate Transfer Taxes Enacted in 2019 Budget Discussed

12 June 2019

New York issued a summary of amendments to the real estate transfer taxes enacted in the 2019-20 budget. The changes apply to conveyances occurring on and after July 1, 2019.

Current Law

Base tax. New York imposes a real estate transfer tax (the base tax) on each conveyance of New York real property or interest in real property when the consideration exceeds $500. This tax is computed at a rate of $2.00 for each $500 of consideration or fractional part of the consideration.

Mansion tax. An additional real estate transfer tax (commonly referred to as the mansion tax) is imposed on each conveyance of New York real property that is or may be used in whole or in part as a personal residence when the consideration for the entire conveyance is $1 million or more. The additional tax is computed at a rate of 1% of the consideration or part thereof attributable to the residential real property.

2019 budget changes. The enacted 2019-2020 budget amended the existing mansion tax and added several new real estate transfer taxes that apply only to conveyances within New York City.

Amendment To Mansion Tax

The mansion tax is required to be paid by the buyer (grantee). The law was amended to provide that when the buyer fails to pay the tax, the seller (grantor) is required to pay. When the seller is required to pay the additional tax because the buyer failed to do so, the additional tax becomes the joint and several liability of the seller and the buyer.

Amendments Applicable Specifically To New York City

Additional base tax. The law was amended to provide for an addition to the base tax (additional base tax) in the amount of $1.25 for each $500, or fractional part, of the consideration for certain conveyances of real property located in New York City. The tax applies to:

  • the conveyance of residential real property where the consideration for the entire conveyance is $3 million or more; and
  • the conveyance of real property other than residential real property where the consideration for the entire conveyance is $2 million or more.

The seller is required to pay the additional base tax. If the seller fails to pay the tax or is exempt from the tax, the buyer is required to pay the tax. In such a situation, the additional base tax becomes the joint and several liability of the seller and the buyer.

For purposes of the additional base tax, all mixed-use real property is considered residential real property. Therefore, if the consideration for the conveyance of mixed-use real property is $3 million or more, the entire consideration is subject to the additional base tax.

Residential real property includes any premises that is or may be used in whole or in part as a personal residence, and includes a one-, two- or three-family house, an individual condominium unit or a cooperative apartment unit.

Mixed-use real property is real property that is used for both residential and other than residential (for example, commercial) purposes

Supplemental tax on residences. A supplemental tax was also added on the conveyance of residential real property located in New York City where the consideration for the conveyance is $2 million or more. The supplemental tax differs depending on the amount of the consideration for the entire conveyance as follows:

  • if the entire conveyance is at least $2 million but less than $3 million: the rate is 0.25%;
  • if the entire conveyance is at least $3 million but less than $5 million: the rate is 0.5%;
  • if the entire conveyance is at least $5 million but less than $10 million: the rate is 1.25%;
  • if the entire conveyance is at least $10 million but less than $15 million: the rate is 2.25%;
  • if the entire conveyance is at least $15 million but less than $20 million: the rate is 2.5%;
  • if the entire conveyance is at least $20 million but less than $25 million: the rate is 2.75%; and
  • if the entire conveyance is $25 million or more: the rate is 2.9%.

The buyer is required to pay the supplemental tax. If the buyer fails to pay the tax or is exempt, the seller is required to pay the tax. In such a situation, the supplemental tax becomes the joint and several liability of the seller and the buyer.

The supplemental tax is due on the conveyance of mixed use real property when the consideration for the entire property is $2 million or more. Tax is computed only on the consideration attributed to the residential portion of the property.

Multiple transfers. When a seller transfers more than one interest in real property to a buyer, the property interests will be treated as a single conveyance when the property interests are used in conjunction with each other or there is a clear relationship between each property interest. When multiple transfers are treated as a single conveyance, the consideration for these transfers must be added together to determine whether the additional base tax or supplemental tax are due.

A seller making multiple transfers in New York City must complete Form 584.6-NYC, Real Estate Transfer Tax Return Schedule of Apportionment, to show how consideration is apportioned between the properties and compute the additional base tax, supplemental tax, and other applicable real estate transfer taxes.

Taxes collected. The base tax, additional base tax, mansion tax, and supplemental tax are all due within 15 days from the date of conveyance and are to be remitted with 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.

Grandfathered conveyances. The additional base tax and supplemental tax apply to conveyances occurring on or after July 1, 2019. However, these taxes will not be imposed on any conveyance made pursuant to a binding contract entered into on or before April 1, 2019, provided the date of execution of the contract can be confirmed by independent evidence. A conveyance pursuant to a contract entered into on or before April 1, 2019, that is substantially amended after April 1, 2019, will not qualify for the grandfather exemption.

The recording of a contract and the payment of a deposit would constitute independent evidence to support that a contract was entered into on or before April 1, 2019. The Department of Taxation and Finance will also consider any other evidence presented.

Examples Reflecting All Real Estate Transfer Taxes

The summary provides various examples that reflect all applicable real estate transfer taxes that can be due for different conveyances.

TSB-M-19(1)R, New York Department of Taxation and Finance, June 11, 2019