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In New York, Don't Forget the Transfer Tax

By Richard J. Koreto 
Posted on 5/24/12

As 2011 drew to a close, New York updated its guidance on real estate transfer taxation. Unlike many other state taxes, which are payable on set schedules, transfer taxes are due shortly after the transaction occurs, so there's no way to simply download a reminder onto an online calendar. Also, the rules have some twists, and penalties are severe, so it plays to review guidance.

The state Department of Taxation and Finance has a page dedicated to the real estate transfer tax, with links to additional guidance. Below are some of the key points.

The Form: When real estate is transferred, taxpayers must fill out Form TP-584. Instructions are available in a separate document. In general, taxpayers must file Form TP-584 with the recording officer of the county where the real property being conveyed is located, no later than the 15th day after the delivery of the instrument effecting the conveyance.

The Tax Rate: The transfer tax rate is $2.00 for each $500, or fractional part thereof, of the consideration. But those buying upscale will pay more with the so-called mansion tax: an additional 1 percent of the sales price beyond the $2/$500 tax. (Despite publicized high-end purchases in New York City, however, the median price for a house statewide is only about $212,000, according to preliminary 2012 data from the NYS Association of Realtors.)

Who Has to Pay: This is tricky. The standard tax is paid by the seller, but if the seller doesn't pay, or is otherwise exempt, the buyer must pay. For the mansion tax, it's the reverse: It's paid by the buyer. But if the buyer is exempt, the seller has to pay.

Exemptions: The state has outlined these in Form TP-584 (Schedule B, Part III). Exempt entities and situations for transfer tax purposes include governmental entities or conveyances under the federal Bankruptcy Act. Additionally, the purchase of real property where the consideration is less than $200,000 and such property was used solely by the grantor as the grantor’s personal residence is exempt, but additional conditions in line J apply here.

Penalties: Any taxpayers who fail to file a return or who do so late will face a penalty of 10 percent of the amount of tax due plus an interest penalty of 2 percent of such amount for each month of delay, up 25 percent in the aggregate. The department may waive some or all of the penalty if it finds the delay was due to reasonable cause and not willful neglect.