5 Burning Questions & Answers About Taxes on Selling a House in New York

How do I calculate my capital gains tax based on my purchase price, improvements, and selling expenses?

Use this simple formula (disclaimer: consult a tax professional for true numbers!):

Sale Price

(Purchase Price + Capital Improvements + Selling Costs) = Taxable Gain

Then apply:

• 0%–20% long-term capital gains rate (if you owned it >1 year)
• Up to $250K exclusion for single sellers or $500K for married couples if it was your primary residence for 2 of the last 5 years

If your taxable gain falls below the exclusion limit → You owe $0 capital gains tax

Not into doing math? Here’s a handy calculator tailored to New York state property owners. Note: NYC has additional taxes.

Which home improvements qualify for increasing my cost basis, and what documentation do I need?

Qualifying improvements are upgrades that add value or extend the life of the home, such as:

• Kitchen or bathroom remodels
• New roof, windows, HVAC
• Additions (deck, bedroom, garage)
• Major plumbing or electrical upgrades
• Landscaping improvements

Recordkeeping: Save receipts, contracts, permits, invoices, even before/after photos.

The IRS accepts any proof that ties the improvement to the property.

Routine maintenance (painting, lawncare) does not increase cost basis.

If I’m selling an inherited property, what steps do I take to apply the step-up in basis?

Do these three things:

1️⃣ Get an appraisal showing fair market value at the owner’s date of death

2️⃣ Use that appraised value as your new cost basis

3️⃣ Report any gain/loss only on the difference between the sale price and stepped-up basis

If you sell at or near the appraised value → you typically owe little or no capital gains tax.

What taxes and fees will come out of my closing proceeds vs. what the buyer pays?

Seller typically pays:

• NY State transfer tax (0.4% of sale price)
• Seller’s attorney fees
• Real estate commissions (if using an agent)
• Mortgage payoff + satisfaction recording fees
• Any unpaid property taxes

Buyer typically pays:

• Title insurance & mortgage fees
• Their own attorney fees
• In certain Suffolk towns → 2% Peconic Bay tax (buyer responsibility)

➡️ Always check the closing disclosure (CD) to confirm line-by-line.

How can I estimate my true “walk-away” cash amount when selling a house on Long Island?

Use this quick breakdown:

Sale Price

− Loan payoff − Transfer taxes and fees − Closing costs (commissions, legal fees, etc.) − Capital gains (if applicable) = Net Cash To You

If it’s your primary residence and you qualify for the $250K–$500K capital gains exclusion → your tax impact is usually minimal.

Example: Many Long Island sellers walk away with 85–95% of the sale price (depending on mortgage balance).