When selling a house in New York, a lot of people focus on the sale price and real estate agent commissions. But what they might not be thinking about are the different types of New York state taxes on selling a house. And trust us… they add up quickly!
There are a lot of tax implications that you need to be aware of when selling your home and depending on the situation they can have a real impact on your bottom line. Let’s take a closer look at the taxes to sell your home and dig deeper into how taxes are involved in selling a house in New York.
When deciding to sell your house, it’s important to understand what types of tax implications there might be. Typically, sellers tend to think of capital gains tax – the tax you pay on the profit of your home, is the only tax that you’ll be responsible for.
Here are the other types of taxes to keep an eye on. In the sections below, we’ll go into depth about the tax. We’ll also show you what the tax estimate would be if you’re selling a $500k house on Long Island.
The most important tax issue to be aware of when buying or selling a home in New York is capital gains. Capital gains are defined as the profits you make as a result of a real estate or property purchase.
What is capital gains?
The easiest way to think about capital gains is: the difference between the purchase price and the selling price of your property.
The amount of capital gains tax on your sale depends on various numbers and conditions. They include everything from the condition of the property to whether or not the buyer is a legal resident of the United States. Each different adjusts the percentage. There are also plenty of deductions available, including the fees paid for the origination of the loan application, closing costs, and points paid back on a loan to get a lower rate on the mortgage.
Generally speaking, capital gains taxes are around 15% for U.S. residents living in the State of New York. If the house is located within New York City, you have to account for another 10% in NYC taxes. However, it’s possible that you qualify for an exemption.
If the house was the seller’s primary residence for at least two years within the last five years, they qualify for a capital gains exclusion of $250,000 for an individual and $500,000 for a married couple.
It’s good to know how to report capital gains taxes as well. You’ll find them on Schedule D of your IRS form. Make sure to differentiate between long-term and short-term capital gains, as they vary based on the length you owned the property and your household income.
One of the key takeaways from all of this is that it benefits the owner to live in the residence for at least one year before deciding to sell the house. If you do, you will pay less in capital gain from the sale of the house.
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Step-up in basis is a tax provision that adjusts the value of an inherited asset for capital gains tax purposes. When someone inherits a property, the cost basis (original purchase price) is “stepped up” to its fair market value (FMV) at the time of the original owner’s death rather than the price the deceased originally paid for it.
If a person purchased a home for $200,000 and it’s worth $500,000 at their death, the heir receives a stepped-up basis of $500,000. If the heir sells the property immediately for $500,000, they pay no capital gains tax because there is no profit based on the new basis.
This is a huge tax savings for heirs if they decide to sell. This applies to most inherited assets, including real estate, stocks, and other investments.
Selling a house below market value may have tax implications, including capital gains taxes, particularly the step-up in basis provision.
What is real estate transfer tax?
In New York State, a real estate transfer tax is imposed on the conveyance of real property when the consideration exceeds $500. The tax rate is calculated at $2 for every $500 of the transaction’s value (this comes to 0.4% of the sale price).
In New York City specifically, there is an additional Real Property Transfer Tax (RPTT) for residential properties:
If you sell your home in a city on Long Island (e.g., Nassau or Suffolk County) for $500,000, you will owe real estate transfer taxes at the state level.
At $2 per $500, this comes out to $2,000 in NYS transfer tax.
Note: Long Island does not have the additional transfer tax that NYC does.
Local real estate transfer taxes on Long Island vary by county and town, so make sure to check local laws.
For example, Nassau County does not impose any additional transfer tax beyond the state tax, making transactions straightforward.
In Suffolk County, certain towns participate in the Peconic Bay Region Community Preservation Fund (CPF), which levies a 2% tax on the buyer to fund land and water conservation efforts. This tax applies in:
Although, this only applies on the portion of the sale price that exceeds the exempt amount. For instance, in some towns, the first $250,000 of an improved property (such as a home) is exempt, while for vacant land, the exemption may only be $100,000.
Example on the sale of a $500k house:
If you sell a home in Riverhead (Suffolk County, Long Island) for $500,000, you will be subject to local real estate transfer taxes.
Riverhead is part of the Peconic Bay Region, meaning a 2% CPF tax applies to the buyer. However, exemptions reduce the taxable amount.
Total Local Transfer Taxes:
When a non-resident sells property located in New York State, they are generally required to estimate and pay the state income tax on any capital gain from the sale at the time of closing.
Purpose: To ensure that non-residents fulfill their New York State tax obligations on gains from the sale of real property within the state.
Exemptions: Certain transactions are exempt from this requirement, including:
In our example of selling a $500k house on Long Island, we’ll assume:
This means the adjusted cost-basis would be $380k (add all three above up). The capital gain would be $120k ($500k-$380k).
The estimated tax due at a 10.9% rate in New York State would be $13,080.
What are mortgage satisfaction recording fees?
When selling a home, if there is an existing mortgage on the property, the seller must pay off the remaining loan balance before the title can transfer to the new owner. This process involves mortgage satisfaction, which is the formal acknowledgment that the loan has been fully paid. Once the mortgage is satisfied, a document is recorded with the county clerk’s office or recorder of deeds to officially remove the lender’s lien from the property title.
These costs can vary based on county regulations and lender policies. Some counties charge a flat fee, while others base the fee on the remaining mortgage balance or the number of pages in the recorded document. Additionally, lenders may impose their own administrative or processing fees for handling the mortgage payoff and preparing the necessary paperwork.
In Islip, New York, which is part of Suffolk County, when you pay off your mortgage, a Satisfaction of Mortgage document must be recorded with the county to officially release the lender’s lien on your property. The Suffolk County Clerk’s Office charges specific fees for this recording process.
Here are the fees you might see:
For a typical Satisfaction of Mortgage document in Islip, the total fees would be $250.00
It’s very common when selling property on Long Island and New York, that either the seller or buyer will owe back-property taxes.
In Nassau County, the first half of your property taxes are due January 1st, and the rest by July 1st.
If you sell your home on February 1st, you will have paid more property taxes – enough to cover around 5 months for the future property owner. In this case, the buyer would owe the seller 5 months of property taxes.
Conversely, if you haven’t paid taxes for a period before closing, the buyer may deduct the unpaid amount from your sale proceeds or require you to pay it at closing.
If you have outstanding property taxes that have not been paid:
The state of New York property tax rates are used to calculate the value of your house. On your property tax bill, you will see a variety of different rates, including rates for your school district, city, special districts, and county. There could be additional special charges for tax districts in some places to support projects or services such as parks and libraries.
Each year, rates are revised based on the total value of the property in a tax district (the tax base) and the portion of income required by the tax authority as per the property tax system. Property tax increases in most districts are limited to the lower of 2% or the rate of inflation, thus rates don’t vary significantly from year to year. However, that cap can be overcome by a 60% majority of a local government board or district voters.
In New York, real estate tax rates are expressed in mills or millage rates of real property. A mill is equivalent to one dollar of tax for $1,000 of property value. Since these can be a bit confusing, it’s also a good idea to look at effective tax rates. These would be the actual tax payments made as a proportion of the home’s value.
As a taxpayer, your tax class determines your NYC property tax rate. There are four types of taxes:
New York City finalized the real estate tax rates for the fiscal year 2024/2025, which began on July 1, 2024, and ends on June 30, 2025.
The following table compares annualized tax rates for fiscal years 2024/25 and 2024/25:
| The tax Year 2024/25 | The Tax Year 2024/25 | |
| Class 1 (1-3 family residential) | 20.309% | 20.085% |
| Class 2 (4 or more family, condos, co-ops) | 12.502% | 12.500% |
| Class 3 (utility property) | 12.283% | 11.181% |
| Class 4 (nonresidential) | 10.592% | 10.762% |
Source: nyc.gov
The State of New York does have a 4% state sales tax and permits local authorities to obtain a 4.875% local choice sales tax. There are 640 local tax authorities in the state, with a median local tax of 4.254%.
The greatest sales tax rate in New York is 8.875% when added with the state sales tax in the cities of Brooklyn, New York, Bronx, Staten Island, and Flushing (and 54 other cities). The following table indicates the median effective tax rates in New York State for each county:
Source: smartasset
Whilst other taxes in New York City are relatively high (such as sales and income taxes), the city’s property tax rates are really quite modest. Many New Yorkers pay considerably less than the existing low rates would imply due to a variety of property tax exemptions set by the City council, helping ease the tax burden.
If you are eligible for an exemption or abatement, you may be able to decrease your tax liability. Disabled Homeowners Exemption, the Veterans Exemption, the Senior Citizens Homeowners Exemption, and The School Tax Relief (STAR) Exemption, are among the exemptions offered.
Something that is important to note is that taxes work a little differently if a non-U.S. resident is involved in selling a New York house. If a non-resident owns the property for over a year, they must pay 30% of the sale price amongst their federal and state taxes. This is due to Foreign Investment in Real Property Tax Act, which holds these taxes off from the sale’s proceeds in order to ensure that any non-resident pays taxes on a real estate transaction. New York State holds back 6.85% while the IRS withholds 10%. When the real estate is sold, the buyer or seller must file a Statement of Withholding on Disposition by Foreign Persons of United States Real Property Interests form with the IRS.
Someone could avoid these kinds of taxes by creating a Limited Liability Company, or LLC. Doing so would make it so that the entity buying or selling real estate in New York is no longer just a person.
You are going to want to be aware of the many tax exemptions that exist when buying or selling homes in New York. First, if you own a house as a primary residence for at least two years and you have to sell it due to unavoidable circumstances that require relocation (a promotion, health problems, etc.), you can receive a tax exemption. When it comes to health reasons, you’ll need to make sure you have a letter from a physician that describes the issue in detail, just in case there is an audit at a later date.
You can also qualify for a real estate tax exemption for “unforeseen circumstances. What does that mean, exactly? Well, the IRS defines it as “the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home.” Some of the examples include natural disasters, divorce, death, multiple births from one pregnancy, terrorism, or a change in employment status. It’s quite a wide set of parameters to choose from. You’ll want to consult IRS Publication 523 to get an even clearer idea of what qualifies as “unforeseen circumstances.”
Going back to capital gains, there is a provision in the tax code that allows those enlisted in the Army, Navy, or National Guard do not need to have lived in the house for at least two years in order to receive the exemption. Also, instead of five years, you have to have used it as a primary residence within the last ten years, accounting for the fact that some military members are away on active duty.
One other way to earn an exemption on capital gains is to buy a “like-kind” house or property. What this means is a house of equal or greater value than the property that you’ve sold. There are often restrictions that require you to have purchased the new home within 180 days of selling your older house. If you do seek this exemption, you have file forms with the IRS so that they are aware of the new purchase. Also, the new house has to be located within the continental United States.
You should make note of the tax advantage you can receive when you have a mortgage on your New York house. This can come in handy when trying to figure out your strategy for buying or selling. When you have a mortgage, all interest you pay is tax-deductible and therefore reduces the amount of income that gets taxed. You should also consult with an accounting or tax professional as there are limits and regulations when it comes to what you can claim related to real estate taxes and you don’t want to catch the attention of New York State or the IRS.
Now that you know about the taxes involved when trying to sell your house in New York, it’s a lot of information and a lot to take in. But if you have decided to sell, you can sell your house as-is directly to a cash buyer like Leave the Key Homebuyers.
They’ll buy your house in any condition or situation. They’ll review the details of your house and find time to meet you at the property quickly. They’ll handle all the repairs so you don’t even need to worry about it. Then, they’ll make you a fair cash offer based on the value of the house. If you accept, you set the closing date. Then, all you need to do is sign the contract and get your cash.
