New York State’s real estate transfer tax starts at $2 for every $500 of the sale price, which works out to 0.4% of the purchase price on most transactions. The seller pays this base tax. Residential sales of $1 million or more trigger an additional 1% “mansion tax” that the buyer pays, and properties in New York City can face several more layers of state surcharges on top of that.
How the Base Rate Is Calculated
The standard tax is $2 for every $500 of consideration, or any fraction of $500, and it only applies when total consideration exceeds $500. A $500,000 sale produces $2,000 in base tax. A $750,000 sale produces $3,000.1New York State Senate. New York Tax Law 1402 – Imposition of Tax
“Consideration” generally means the purchase price plus the value of any liens or mortgages that remain on the property at closing. One exception matters for most homebuyers: on sales of one-, two-, or three-family houses and individual residential condominium units, the value of remaining liens is excluded. The same exclusion applies to any conveyance where total consideration is less than $500,000, regardless of property type.1New York State Senate. New York Tax Law 1402 – Imposition of Tax
So a buyer purchasing a single-family home for $400,000 who assumes an existing $100,000 mortgage calculates the tax on $400,000. A buyer purchasing a commercial building for $800,000 with a $200,000 lien remaining calculates the tax on $1,000,000. Getting this wrong is one of the more common filing mistakes, and it can trigger penalties.
The Mansion Tax on Sales of $1 Million or More
Any residential property transfer where total consideration reaches $1 million triggers an additional 1% tax under Tax Law § 1402-a. Single-family homes, two- and three-family houses, individual condominium units, and cooperative apartment units all qualify as residential for this purpose.2New York State Senate. New York Tax Law 1402-A – Additional Tax
The tax applies to the full consideration, not just the amount above $1 million. A $1,500,000 home purchase produces $6,000 in base tax plus $15,000 in mansion tax, for $21,000 total. Because the threshold is a bright line, a sale priced at $999,999 avoids the mansion tax entirely while a sale at $1,000,000 triggers the full 1% on the whole price. That $1 difference costs the buyer $10,000, which is why contract prices sometimes sit just below the threshold.2New York State Senate. New York Tax Law 1402-A – Additional Tax
Extra State Taxes on New York City Properties
Properties in New York City face additional state-level taxes that took effect on July 1, 2019 and sit on top of the base and mansion taxes.
For residential properties with consideration of $3 million or more, the state imposes an additional base tax of $1.25 per $500. Non-residential properties hit the same additional base tax at a lower threshold of $2 million. These effectively raise the base rate from 0.4% to 0.65% above those thresholds.3New York State Department of Taxation and Finance. Real Estate Transfer Tax
A separate supplemental tax under Tax Law § 1402-b applies to residential transfers in New York City at $2 million or more, on a graduated scale:
- $2 million to under $3 million: 0.25%
- $3 million to under $5 million: 0.50%
- $5 million to under $10 million: 1.25%
- $10 million to under $15 million: 2.25%
- $15 million to under $20 million: 2.50%
- $20 million to under $25 million: 2.75%
- $25 million and above: 2.90%
Each bracket’s rate applies to the full consideration attributable to the residential property, not just the amount above the bracket threshold.4New York State Senate. New York Tax Law 1402-B – Supplemental Tax in Cities Having a Population of One Million or More
The stacking adds up quickly. A $5 million residential purchase in New York City owes the 0.4% base tax ($20,000), the 1% mansion tax ($50,000), and the 1.25% supplemental tax ($62,500), for $132,500 in state transfer taxes alone. New York City also imposes its own separate Real Property Transfer Tax administered by the NYC Department of Finance, which stacks on top of all the state taxes. Anyone buying or selling in the city needs to account for both layers.
Who Pays Which Tax
The base transfer tax under § 1402 is the seller’s responsibility. The statute names the grantor, and the tax cannot be shifted to the buyer directly or indirectly except by agreement in the purchase contract. If the seller fails to pay or is exempt, the buyer becomes liable by default.5New York State Senate. New York Tax Law 1404 – Liability for Tax
The mansion tax flips that default. The buyer pays the 1% additional tax on residential purchases of $1 million or more, and the seller is on the hook if the buyer doesn’t pay.2New York State Senate. New York Tax Law 1402-A – Additional Tax The New York City supplemental tax under § 1402-b works the same way: buyer pays, seller as backstop.6New York State Senate. New York Tax Law 1402-B – Supplemental Tax
Buyers and sellers routinely negotiate who bears the actual cost as part of the purchase agreement, especially in competitive markets. Regardless of any private deal, the state holds the statutorily designated party responsible if the tax doesn’t get paid.
Exemptions
Tax Law § 1405 lists several transfers that owe no tax. The most commonly invoked:
- Conveyances to or from the United States, New York State, their agencies, and political subdivisions.
- Transfers used solely to secure a debt. Creating, assigning, or satisfying a mortgage is not a taxable conveyance.
- Bona fide gifts of real property with no consideration and no connection to a sale. You still have to file the paperwork to claim the exemption.
- Changes in form without a change in beneficial ownership, such as moving property into a wholly owned LLC or transferring between a parent corporation and its wholly owned subsidiary.
- Property passing by will or inheritance, which is excluded from the definition of “conveyance” altogether.
A note on gifts: a gift of real property avoids the state transfer tax, but it can still have federal gift tax consequences the donor needs to report.8Internal Revenue Service. Gifts and Inheritances
Filing the Return and Paying the Tax
Every transfer requires Form TP-584, the Combined Real Estate Transfer Tax Return. The form collects names, addresses, and taxpayer identification numbers for all grantors and grantees, along with the property’s tax map designation and total consideration.9New York State Department of Taxation and Finance. Combined Real Estate Transfer Tax Return TP-584 Properties located in New York City use Form TP-584-NYC. You also file Form RP-5217, the Real Property Transfer Report, used for local assessment and state equalization records.
The deadline is 15 days after the deed is delivered from the grantor to the grantee. In most cases you submit the forms and pay the tax at the county clerk’s office at the same time you record the deed, so the deadline and the recording happen together. If the deed will not be recorded, or if recording happens after the 15-day window, you file Form TP-584 and pay the tax directly to the NYS Tax Department.10New York State Department of Taxation and Finance. Instructions for Form TP-584 The county clerk cannot record a conveyance until the return has been filed and the tax paid.
For properties in Manhattan, Queens, the Bronx, Brooklyn, and Staten Island, the Real Property Transfer Tax returns are submitted electronically through the Automated City Register Information System (ACRIS), which also handles the state transfer tax forms.11NYC Department of Finance. ACRIS
Penalties for Late Filing or Underpayment
Missing the deadline or underpaying carries real cost. A grantor or grantee who fails to file or pay on time faces a penalty of 10% of the tax due. Interest then accrues at 2% of the amount owed for each month or partial month the payment is late, starting after the first month, capped at 25% of the tax due.12New York Codes, Rules and Regulations. 20 CRR-NY 575.20 – Interest and Civil Penalties
On a $20,000 tax bill, the initial penalty alone is $2,000, with another $400 accruing each month after the first. The safest approach is to have your attorney or title company calculate and remit the tax at closing so the liability never outlives the transaction.
Federal Income Tax Treatment
A common question at closing is whether the transfer tax is deductible on your federal return. It is not. The IRS specifically lists transfer taxes and stamp taxes as items you cannot deduct as real estate taxes.13Internal Revenue Service. Publication 530 – Tax Information for Homeowners
The money is not wasted, though. If you pay the tax as the seller, you can treat it as a selling expense, which reduces your taxable gain. If you pay as the buyer, you add it to your cost basis in the property, which reduces your gain when you eventually sell.14Internal Revenue Service. Publication 523 – Selling Your Home On a high-value property where the combined transfer taxes run into tens of thousands of dollars, that basis adjustment can meaningfully affect your capital gains calculation down the road.