New York Real Estate Taxes

New York City Real Estate Capital Gains Taxes

15% for US residents within New York State
10% for US residents within New York City

Profits from the sale of real estate assets are considered capital gains. Capital Gains Taxes vary for residents and non residents depending on the state of the property.

When selling your property, other charges are considered in Capital Gains Tax calculations. Closing Costs, Loan Points and Loan Application Fees are deducted from Capital Gains.

Certain stipulations allow sellers to avoid capital gains taxes on their primary residence of over 2 years. Single individuals are exempt from capital gains taxes on the first $250,000. Married couples are exempt from their first $500,000.

Tax benefits on investment properties for US residents

Interest paid for loan is fully deductible
Interest for Purchase, Construction and Improvement loans is fully deductible up to $1,000,000 for married couples and $500,000 for single individuals.
Home equity loan interest is deductible up to $100,000 for married couples and $50,000 for single individuals

Taxes for Non Us Residents

30% of the Sales Price is paid in taxes to Federal and State Governments

Properties held by non residents for longer than 1 year are taxed 30% of the sales price. The Real Property Tax Act was created in 1980 to withhold taxes directly from proceeds of a sale to guarantee tax payments from non US residents. The IRS withholds 10% of the sales price and New York State withholds an additional 6.85% in taxes. A Statement of Withholding on Disposition by Foreign Persons of United States Real Property Interests must be filed with the IRS by buyers and sellers of real property.

Bypass property taxes with LLC Corporation

LLC’s can have multiple partners and offer additional protection to each partner in the corporation. One of the many benefits of owning real estate through an LLC Corporation is when selling the property, there is an option to transfer property title to the LLC to avoid taxes on the sale. After the property is purchased, partners transfer title to the partner of the LLC so ownership is held in that partner’s personal name.

Tax Exemption Options

Exemption options include a tax break if the property is used as a primary residence for two years but then you are forced to sell the home due to relocation for a different job, health reasons and other unavoidable circumstances.

Health issues include those that require a person to sell the home to raise money for medical expenses. The individual is not required to file a physician’s letter with the IRS but it is advisable to keep such a letter with all personal information for future references in case he/she is audited.

Unforeseen circumstances are defined by the IRS as “the occurrence of an event that you could not reasonably have anticipated before buying and occupying your main home.” Unforeseen circumstances causing the sale of the home can include but are not limited to natural disasters, acts of war, acts of terrorism, death, divorce, separation, multiple births from the same pregnancy and change of employment status, which leaves the homeowner unable to provide the basic level of living and paying for living expenses. Further information is available in the IRS Publication 523, which includes detailed descriptions of unforeseen circumstances.

Individuals enlisted in the armed services have a special provision in regards to the Capital Gain of the sale of their home. A law as of 2003 makes military personnel exempt from the two year use of the home and has changed the requirement to be extended up to 10 years. The purpose of this law allows the military personnel the ability to fulfill the obligations of serving their country.

Prior to filing for any exemptions we advise that you consult an accountant regarding the tax law exemptions for Capital Gains.

Capital Gains Schedule D for Tax Filing

When filing personal income taxes with the IRS, the Schedule D is used to report Capital Gains. If the individual owned the residence for one year or less, the Capital Gain is reported on the Schedule D as a short-term Capital Gain. If the residence was owned longer than a year, it is reported on the Schedule D as a long-term Capital Gain. The time of ownership is crucial to the period for reinvesting the Capital Gain in the future. If an individual can delay selling the residential home until they have lived in the home for over two years, they will have more time to reinvest any Capital Gain from the sale of the home.

Tax Abatements

Tax abetments are incentive tax programs for Manhattan developers to encourage building and neighborhood development.

NYC Tax Abatement Incentives

Tax Exemption Program
This program covers new buildings as well as certain restorations. A 421-A or 421-G tax abatement is for new buildings and a J-51 applies to converted buildings.
421-A
The 421-A program phases out tax exemptions over 10 years. The real estate tax will increase 20% every second year until maturity (first and second year – 100% exempt, third and fourth year – 80% exempt, continuing to the tenth year).
421-G
The 421-G incentive applies to a specific area – below Murray Street in Manhattan. Eligible properties within this area will see tax benefits for a period of 14 years. The lower payment is applicable in the initial 8-10 years and will phase out gradually until year 14.
Additional Incentives
Some NYC buildings are eligible for lengthy abatement periods between 15-25 years. Specific factors such as location, availability of reasonably priced units, or receiving government assistance through loans and grants, will influence a building’s eligibility for long-term abatement incentives.