NEW YORK, NY – Property sellers and buyers in New York City face multiple layers of transfer taxes that can significantly increase closing costs, but certain exemptions and transaction structures may reduce or eliminate what is owed. Manhattan real estate attorney Natalia Sishodia of Sishodia PLLC (https://sishodia.com/how-to-avoid-the-nyc-transfer-tax/) details the exemptions, deal structures, and timing strategies that may help reduce transfer tax liability on NYC real estate transactions.

According to Manhattan real estate attorney Natalia Sishodia, New York Tax Law Article 31 imposes a base state transfer tax on conveyances exceeding $500, while New York City charges its own Real Property Transfer Tax (RPTT) on top of that amount. The seller typically pays these taxes under both New York Tax Law Section 1404 and the New York City Administrative Code. However, buyers of new construction in Manhattan often face a different situation, as many sponsors include contract language requiring the buyer to cover the seller’s transfer taxes as part of the deal. “When the buyer agrees to pay the seller’s costs, those payments usually count as additional consideration for transfer tax purposes,” notes Sishodia.

Manhattan real estate attorney Natalia Sishodia emphasizes that several types of conveyances may qualify for exemptions under New York Tax Law Section 1405 and NYC Administrative Code Section 11-2106. These include government conveyances, deeds given solely as security for a debt, confirmatory or corrective deeds, bona fide gifts without consideration, conveyances that merely change the form of ownership without changing beneficial ownership, bankruptcy conveyances, and deeds of partition. Each exemption has specific requirements, and claiming one incorrectly can result in penalties. A gift deed that also transfers mortgage liability, for example, may not qualify as a full exemption because the debt relief counts as consideration under Tax Law Section 1401(d).

One of the most effective tools for reducing transfer taxes in Manhattan is the purchase CEMA, or consolidation, extension, and modification agreement. Attorney Sishodia explains that in a CEMA transaction, the buyer assumes the balance of the seller’s existing mortgage and borrows only the additional amount needed to cover the difference, with the two mortgages then consolidated into one. “This structure can lower the taxable consideration because part of the seller’s existing mortgage stays in place, generating savings on both state and city transfer taxes,” she adds. The NYC Department of Finance applies a review window from six months before to three months after the transfer date, and a lien may lose its tax-excludible status during this period if the lender changes and the interest rate or loan term is altered by 10% or more.

The firm notes that NYC and New York State each impose their own transfer tax rates that vary based on property type and sale price. For one-, two-, or three-family homes and individual condo or co-op units, the NYC RPTT rate is 1% when the sale price is $500,000 or less and 1.425% when it exceeds $500,000. New York State’s base rate is 0.4%, with an additional 0.25% applying to residential properties at $3,000,000 or more. For most other property types, the RPTT rates are 1.425% up to $500,000 and 2.625% above that threshold, and combined state and city base rates can exceed 3% in certain transactions.

Sishodia also highlights that the mansion tax adds another layer to high-value transactions. The state mansion tax of 1% applies to residential purchases of $1,000,000 or more, while New York City imposes a progressive supplemental tax starting at 0.25% for purchases at $2,000,000 and increasing in tiers up to 2.9% for sales at $25,000,000 and above. The continuing lien deduction from a CEMA does not reduce the mansion tax, which is calculated on the full purchase price regardless of any liens that remain on the property.

Property documents for Manhattan, Queens, the Bronx, and Brooklyn are filed through the Automated City Register Information System (ACRIS), maintained by the Office of the City Register, while Staten Island filings are handled through the Richmond County Clerk. Timing a property sale strategically can also affect the total transfer taxes owed, as crossing certain price thresholds triggers higher tax rates. The consequences of missing a transfer tax payment include penalties, interest, and property liens imposed by the New York City Department of Finance, and willful failure to pay can carry additional consequences under Tax Law Sections 1416 and 1417. For those involved in New York City real estate transactions, working with an experienced real estate attorney may help identify lawful strategies to minimize transfer tax exposure.

About Sishodia PLLC:

Sishodia PLLC is a Manhattan-based boutique law firm focused on high-end residential and commercial real estate transactions, business law, estate planning, and taxation. Led by attorney Natalia Sishodia, the firm represents domestic and international clients in condo and co-op purchases, deed transfers, new developments, leasing, lending, and 1031 tax-deferred exchanges throughout New York City. For consultations, call (833) 616-4646.

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Website: https://sishodia.com/

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Company Name: Sishodia PLLC
Contact Person: Natalia A. Sishodia
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Phone: (833) 616-4646
Address:600 3rd Ave 2nd floor
City: New York
State: New York 10016
Country: United States
Website: https://sishodia.com/