Real estate transfer tax: Tax expenditure estimates
Real estate transfer tax: Tax expenditure estimates
This section of the report provides tax expenditure estimates for 17 separate provisions of the real estate transfer tax. Table 7 provides a list of expenditures based on the tax law as of January 1, 2025. The estimates are based on liability data from the 2022–23 fiscal year. Base year 2022–23 liability is also extrapolated to the 2025–26 fiscal year. The estimates are based on an examination of liability incurred between April 1 and March 31. Real estate transfer tax liability for the 2022–23 fiscal year has been included to provide some perspective to the tax expenditure estimates.
Description of tax
Adopted in 1968, New York State Tax Law Article 31 imposes a real estate transfer tax on the conveyance of real property or an interest in real property where the consideration exceeds $500. Payment is due no later than fifteen days after the delivery of the instrument affecting the conveyance (such as a deed). The rate of tax equals two dollars for every five hundred dollars (or fraction thereof) of consideration. Responsibility for payment rests with the person making the conveyance, the grantor. If the grantor (the seller) has failed to pay the tax or is exempt from liability, the grantee (the buyer) is responsible for payment.
The transfer tax also applies to conveyances of shares of stock in a cooperative housing corporation, the creation of long-term leaseholds and subleases, and transfers or acquisitions of a controlling interest in an entity which owns an interest in real property.
Together with the basic transfer tax, an additional one percent tax (the mansion tax) is imposed on the conveyance of residential real property or interest therein where the consideration is one million dollars or more. The additional tax is imposed upon the grantee. However, if the grantee is exempt from tax, then the tax is imposed on the grantor.
Data sources
The major source of data used to compute the tax expenditure estimates is the Real Estate Transfer Tax Return Database. This file, compiled by the Department of Taxation and Finance, includes information on selected transfers of real property. It includes data items from the TP-584 and TP-584-NYC tax returns filed with these transfers and is an unverified data file.
Methodology
Historical estimates are projected to fiscal year 2025–26 levels using various economic forecast variables.
| Tax item | 2019–2020 ($ millions) | 2020–2021 ($ millions) | 2021–2022 ($ millions) | 2022–2023 ($ millions) | Forecast 2025–2026 ($ millions) | Reliability level |
|---|---|---|---|---|---|---|
| Exclusions | ||||||
| 1. Continuing lien deduction | 3.3 | 3.3 | 4.9 | 3.8 | 4.0 | 2 |
| Exemptions | ||||||
| 2. State of New York | N/A | N/A | N/A | N/A | N/A | 5 |
| 3. The United Nations and United States of America | N/A | N/A | N/A | N/A | N/A | 5 |
| 4. Conveyances to the United Nations, United States of America, or State of New York | 2.6 | 1.4 | 1.9 | 1.5 | 2.0 | 2 |
| 5. Conveyances which secure a debt or other obligation | * | * | 0.1 | * | * | 2 |
| 6. Conveyances that confirm, correct, modify, or supplement a prior conveyance | 0.4 | 0.2 | 0.7 | 0.3 | * | 2 |
| 7. Bona fide gifts and conveyance without consideration | 0.2 | 0.1 | 0.3 | 0.5 | * | 2 |
| 8. Tax sale | 0.1 | 0.1 | 0.1 | * | * | 2 |
| 9. Mere changes of identity | 6.8 | 0.9 | 0.0 | 2.1 | 3.0 | 2 |
| 10. Deeds of partition | * | * | * | * | * | 2 |
| 11. Federal bankruptcy act | 1.0 | 1.3 | 4.3 | 9.7 | 3.0 | 2 |
| 12. Contract to sell or option to purchase without use | * | * | 0.1 | 0.1 | * | 2 |
| 13. Option or contract to purchase with right to occupy | * | * | * | * | * | 2 |
| 14. START-UP NY program leases | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 | 2 |
| Credits | ||||||
| 15. Credit for prior transfer tax paid | 0.4 | 0.3 | 0.5 | 0.4 | * | 2 |
| 16. Cooperative housing corporation transfer credit | 0.3 | 0.4 | 0.7 | 1.9 | 0.7 | 2 |
| Preferential tax rates | ||||||
| 17. Real estate investment trust transfers | D/ | D/ | 0.0 | D/ | 0.0 | 2 |
| * | Less than $0.1 million |
|---|---|
| N/A | No data available. |
| D/ | Tax law prohibits the disclosure of individual taxpayer information. |
Exclusions
1. Continuing lien deduction
Citation: Tax Law § 1402
Effective date: August 1, 1968 (amended May 1, 1983)
Description: The real estate transfer tax excludes the amount of any lien or encumbrance remaining at the time of sale involving a one-, two-, or three-family house or individual residential condominium unit, from the total consideration used to calculate the tax due. Additionally, consideration does not include the value of any lien or encumbrance at the time of sale where consideration is less than $500,000.
Exemptions
New York State Tax Law § 1405 exempts certain organizations from payment of the transfer tax. Liability for any tax incurred, when an exempt organization is the grantor, becomes the responsibility of the grantee and is payable no later than 15 days after delivery of the instrument affecting the conveyance. Where both parties are exempt there is no tax due. § 1405 also exempts certain conveyances from tax.
2. State of New York
Citation: Tax Law § 1405(a)(1)
Effective date: August 1, 1968
Description: This section exempts New York State or any of its agencies, instrumentalities, political subdivisions, or public corporations (including a public corporation created pursuant to an agreement with another state or Dominion of Canada) from liability for the transfer tax.
3. The United Nations and United States of America
Citation: Tax Law § 1405(a)(2)
Effective date: August 1, 1968
Description: The real estate transfer tax excuses the United Nations, the United States of America, and any of its agencies or instrumentalities from incurring liability for payment of the tax.
4. Conveyances to the United Nations, United States of America, or State of New York
Citation: Tax Law § 1405(b)(1)
Effective date: August 1, 1968
Description: Exempt from tax are conveyances to the United Nations, the United States of America, New York State, or any of their agencies, political subdivisions, instrumentalities, or any public corporation (including public corporations created pursuant to an agreement with another state or Dominion of Canada).
5. Conveyances which secure a debt or other obligation
Citation: Tax Law § 1405(b)(2)
Effective date: August 1, 1968
Description: The transfer tax exempts conveyances used to secure a debt or other obligation.
6. Conveyances that confirm, correct, modify, or supplement a prior conveyance
Citation: Tax Law § 1405(b)(3)
Effective date: August 1, 1968
Description: The real estate transfer tax does not apply to conveyances which without additional consideration confirm, correct, modify, or supplement a prior conveyance.
7. Bona fide gifts and conveyance without consideration
Citation: Tax Law § 1405(b)(4)
Effective date: August 1, 1968
Description: Conveyances exempted from the tax include conveyances made without consideration, bona fide gifts, bequests, or inheritances.
8. Tax sale
Citation: Tax Law § 1405(b)(5)
Effective date: August 1, 1968
Description: The real estate transfer tax exempts any conveyance given in connection with a tax sale.
9. Mere changes of identity
Citation: Tax Law § 1405(b)(6)
Effective date: July 1, 1989
Description: The transfer tax does not apply to a conveyance used to effectuate a mere change in identity or form of ownership where there is no change in beneficial ownership. This exemption is not applicable to conveyances to a cooperative housing corporation of the real property comprising the cooperative dwelling.
10. Deeds of partition
Citation: Tax Law § 1405(b)(7)
Effective date: August 1, 1968
Description: Exempt from the tax are conveyances which consist of a deed of partition. Partition is the division of property between several persons who are co-owners of the property. The object of a partition is to end the joint tenancy or tenancy in common and divide the property among the respective co-owners.
11. Federal bankruptcy act
Citation: Tax Law § 1405(b)(8)
Effective date: August 1, 1968
Description: This section exempts from taxation any conveyance given pursuant to the Federal Bankruptcy Act.
12. Contract to sell or option to purchase without use
Citation: Tax Law § 1405(b)(9)
Effective date: July 1, 1989
Description: The real estate transfer tax exempts a conveyance which consists of a contract to sell real property without the use or occupancy of such property. Likewise, exempt from tax are conveyances granting an option to purchase real property without the use or occupancy of the property.
13. Option or contract to purchase with right to occupy
Citation: Tax Law § 1405(b)(10)
Effective date: July 1, 1989
Description: An exemption from the transfer tax is allowed for conveyances of an option or contract to purchase real property, which includes the right to use or occupy the property, providing:
- the consideration is less than $200,000;
- such property or at least one unit of a two- or three-family house was used solely as the grantor’s personal residence; and
- the real property consists of a one-, two-, or three-family house, an individual residential condominium unit or the sale of stock in a cooperative housing corporation in connection with a grant or transfer of a proprietary leasehold covering an individual residential cooperative unit.
14. START-UP NY Program leases
Citation: Tax Law § 1405(b)(11)
Effective date: January 1, 2014
Description: Under the real estate transfer tax, certain leases created for a term in excess of 49 years, as well as assignments of any existing leases, are taxable. An exemption is allowed for these leases of real property located in tax-free NY areas to an approved business participating in the START-UP NY Program.
Credits
The real estate transfer tax allows credits for taxes paid in certain transactions.
15. Credit for prior transfer tax paid
Citation: Tax Law § 1405-A
Effective date: July 1, 1989
Description: A grantor is allowed credit against the tax due on a conveyance of real property to the extent tax was paid by the grantor on a prior creation of a leasehold for all or a portion of the same real property or on the granting of a contract or option to purchase all or a part of the same real property.
16. Cooperative housing corporation transfer credit
Citation: Tax Law § 1405-B
Effective date: July 1, 1989
Description: A credit is allowed for a proportionate part of the amount of tax paid upon the conveyance to the cooperative housing corporation of real property comprising the cooperative dwelling or dwellings. The credit applies to the conveyance of cooperative shares to unit purchases. It is allowed only to the extent that the original conveyance of the real property to the cooperative housing corporation effectuates a mere change in identity or form of ownership, and not a change in the beneficial ownership of the property.
Preferential tax rates
The real estate transfer tax allows a preferential tax rate in the following instances.
17. Real estate investment trust transfers
Citation: Tax Law § 1402(b)
Effective date: June 9, 1994, for initial formation real estate investment trusts and July 13, 1996, for existing real estate investment trusts
Description: The transfer tax rate is reduced to $1.00 per $500 (or fractional part thereof) on transfers of real property effected through qualifying real estate investment trust transfers occurring on or after:
- June 9, 1994, in order to form a real estate investment trust; or
- July 13, 1996, and before September 1, 2026, to existing real estate investment trusts.