Step-by-Step Guide to Calculating NYC and NYS Transfer Taxes

This week we wanted to take the opportunity to review the proper method of calculating NYC and NYS Transfer Taxes due on the transfer of Real Property in situations where a Purchaser is contractually obligated to pay some or all of the Transfer Taxes.   In a typical Real Estate Transaction, unless otherwise required by the terms of the Contract, the Seller pays the standard NYS and NYC Transfer Taxes and, if applicable, the Purchaser pays a Special Additional NYS “Mansion” Tax.   As you know, several factors must be considered when calculating the appropriate Transfer Taxes due on a particular transaction including, but not limited to, the monetary consideration being paid by Purchaser at acquisition, the type of Property being sold and the County where the Property is located.  For your convenience and reference, below is a link to our website which lays out a summary of the applicable Tax Rates effective as of the last rate change date (7/1/2019).

https://www.homeabstractcorp.com/resources/transfer-mortgage-tax-rates


Each of these factors will affect the applicable Tax Rate to be applied to your specific transaction but, once you determine the appropriate Tax Rate, the basic calculations to determine the appropriate Transfer Taxes dues are as follows:

NYC Transfer Tax (RPT):

            (Total Consideration Paid)     X      (Applicable Tax Rate) = NYC Transfer Tax to be paid at closing.


NYS Basic Transfer Tax (TP 584):

            ((Total Consideration Paid (rounded up to nearest $500))      X     (Applicable Tax Rate) = NYS Basic Transfer Tax to be paid at closing


If Applicable, NYS Special “Mansion” Tax:

            (Total Consideration Paid)     X      (Applicable Tax Rate) =  NYS Special “Mansion” Tax to be paid at closing.    (NOTE: You do not round up to the nearest $500 when calculating the NYS Special “Mansion” Tax)

Now, in situations where the Contract requires the Purchaser to pay any portion of the NYC and/or NYS Transfer Taxes that would typically be paid by the Seller, both the NYC Department of Finance (“NYC DOF”) and the NYS Department of Taxation and Finance (“NYS DOTF”) require that the Taxable Consideration be “Grossed Up” before the applicable Transfer Tax calculations are made.  Complicating matters a little further, effective 7/1/2021, NYC DOTF revised its guidelines which changed the way the “Gross Up” calculation is to be applied to the NYS Transfer Tax calculation for certain types of properties (NOTE: if your transaction involves a one to three family residential dwelling, an individual residential condominium and an individual residential cooperative unit, or interests therein, you do not have to include the NYS Transfer Tax Rate in the “Gross Up” Calculation).   Below are the formulas used to determine the “Grossed Up” Consideration to be used when calculating the NYC and NYS Transfer Taxes on deals where the Purchaser is paying a portion of the Seller’s transfer tax obligations:

“Gross Up” of the NYC Transfer Tax (RPT):

(Purchase Price Paid)     X    (Combined RPT and TP 584 Rates)   +   (Any additional Sums paid by Purchaser on Behalf of Seller (ie. Sponsor Attorney Fee))  =  RPT “Grossed Up” Consideration.  Once the RPT “Grossed Up” Consideration is calculated it is then added to the Purchase Price to establish the Total Consideration Paid and the calculation of the NYC Transfer Tax (RPT) is calculated as stated above.

“Gross Up” of the NYS Basic Transfer Tax (TP 584):

(Purchase Price Paid)     X    (RPT Rate ONLY  (see NOTE)   +   (Any additional Sums paid by Purchaser on Behalf of Seller (ie. Sponsor Attorney Fee))  =  TP 584  “Grossed Up” Consideration.  (NOTE: Effective 7/1/2021, the NYC DOTF does not require the inclusion the TP 584 Tax Rate in the “Gross Up” Calculation for transfers of a one to three family residential dwelling, an individual residential condominium and an individual residential cooperative unit, or interests therein.  If your transaction involves any other type of property, you must include the Applicable NYS TP 584 Rate in the “Gross Up” Calculation).  Once the TP 584 “Grossed Up” Consideration is calculated it is then added to the Purchase Price to establish the Total Consideration Paid and the calculation of the NYS Basic Transfer Tax (TP 584) is calculated as stated above.

“Gross Up of the NYS Special “Mansion” Tax:

(Purchase Price Paid)     X    (RPT Rate ONLY  (see NOTE)   +   (Any additional Sums paid by Purchaser on Behalf of Seller (ie. Sponsor Attorney Fee))  =  NYS Special “Mansion” Tax “Grossed Up” Consideration.  (NOTE: Effective 7/1/2021, the NYC DOTF does not require the inclusion the TP 584 Tax Rate in the “Gross Up” Calculation for transfers of a one to three family residential dwelling, an individual residential condominium and an individual residential cooperative unit, or interests therein.  If your transaction involves any other type of property, you must include the Applicable NYS TP 584 Rate in the “Gross Up” Calculation).  Once the NYS Special “Mansion” Tax “Grossed Up” Consideration is calculated it is then added to the Purchase Price to establish the Total Consideration Paid and the calculation of the NYS Special “Mansion” Tax “Grossed Up” Consideration is calculated as stated above (NOTE: Remember that you do not round up to the nearest $500 when calculating the required NYS Special “Mansion” Tax.)

The calculations can certainly be confusing for even the most seasoned practitioner. In an effort to clarify the above formulas in a more practical way, please review the following scenarios which “show the math” in determining the proper Transfer Taxes to be paid for each transaction:

SCENARIO 1

Purchaser signed a Contract to Purchase a newly constructed, residential Condominium Unit in Kings County for $1,500,000.00.  The Contract of Sale requires Purchaser to pay 100% of the NYC and NYS Transfer Taxes.

SCENARIO 2

Purchaser signed a Contract to Purchase a newly constructed, residential Condominium Unit in Kings County for $1,800,000.00.  The Contract of Sale requires Purchaser to pay 50% of NYC and NYS Transfer Taxes but Purchaser pays 100% of NYS Mansion Tax.

SCENARIO 3
 
Purchaser signed a Contract to Purchase a newly constructed, Residential Condominium Unit in New York County for $3,500,000.00.  The Contract of Sale requires Purchaser to pay 100% of NYC and NYS Transfer Taxes.

SCENARIO 4
 
Purchaser signed a Contract to Purchase a newly constructed, 1-Family residential Dwelling in Richmond County for $1,300,000.00.  The Contract of Sale requires Purchaser to pay 100% of the NYC and NYS Transfer Taxes as well as $4,000.00 of Developer's Attorney Fees.

SCENARIO 5
 
Purchaser signed a Contract to Purchase a newly constructed,  Commercial building in Queens County for $5,000,000.00.  The Contract of Sale requires Purchaser to pay the NYC and NYS Transfer Taxes.

As an additional resource to assist you in your Transfer Tax calculations, we are including a link to a First American Title Insurance Rate Calculator which also can be accessed
directly through our Website.
https://facc.firstam.com/?SSID=0.3902257017177393