Understanding New York Capital Gains Tax On Real Estate

When you sell or transfer your real estate property in New York, you may have to pay a capital gains tax on the profits earned. The capital gains tax applies to the difference between the sale price and the property's adjusted basis. The adjusted basis is the original cost of the property plus any improvements made over the years, minus depreciation.

So, does New York have a capital gains tax on real estate? In this article, we will discuss the capital gains tax laws in New York, including the rates, exemptions, and deductions available to taxpayers.

What is Capital Gains Tax?

Capital gains tax is a tax on the profits earned from selling or transferring a capital asset, such as real estate, stocks, bonds, or mutual funds. The tax applies only to the gains, not the total sale price. Capital gains tax is applicable on both short-term and long-term gains.

Short-term capital gains are the profits earned from selling a property owned for less than a year. Long-term capital gains are the profits earned from selling a property owned for more than a year.

Does New York Have a Capital Gains Tax on Real Estate?

In New York, the capital gains tax on real estate applies to the sale or transfer of property located within the state. The tax is applicable on both short-term and long-term gains. The tax rate varies depending on the taxpayer's income level and the time the property was owned.

• Short-term capital gains are taxed at the same rate as the taxpayer's ordinary income tax rate. For example, if your marginal tax rate is 24%, your short-term capital gains tax rate will also be 24%.
• Long-term capital gains tax rates are generally lower than short-term ones. In New York, long-term capital gains tax rates range from 0% to 20%, depending on the taxpayer's income level.

New York Capital Gains Tax Rates

The following are the long-term capital gains tax rates applicable in New York for 2021:

• 0% tax rate for taxpayers with a taxable income of up to $40,000 for single filers and up to $80,000 for married couples filing jointly.
• 5% tax rate for taxpayers with a taxable income of more than $40,000 but less than $150,000 for single filers and more than $80,000 but less than $300,000 for married couples filing jointly.
• 5.25% tax rate for taxpayers with a taxable income of more than $150,000 but less than $300,000 for single filers and more than $300,000 but less than $600,000 for married couples filing jointly.
• 5.9% tax rate for taxpayers with a taxable income of more than $300,000 but less than $2,155,350 for single filers and more than $600,000 but less than $2,155,350 for married couples filing jointly.
• 8.82% tax rate for taxpayers with a taxable income of more than $2,155,350.

It is important to note that these rates may change yearly, so it is advisable to consult a tax professional or the New York Department of Taxation and Finance for the latest information.

Exemptions and Deductions

New York offers some exemptions and deductions to taxpayers to reduce their capital gains tax liability on real estate. These include:

• Primary residence exclusion: If you sell your primary residence, you may be eligible for an exclusion of up to $250,000 ($500,000 for married couples filing jointly) from your capital gains tax liability, provided you meet certain eligibility criteria such as having lived in the property for at least two of the five years before the sale.
• Capital gains deferral: If you sell your property and use the proceeds to purchase another like-kind property, you may be able to defer your capital gains tax liability until you sell the new property.
• Capital improvements: The cost of any capital improvements made to the property, such as additions or renovations, can be added to the adjusted basis of the property, reducing the taxable gain on the sale.

It is important to note that these exemptions and deductions have specific eligibility criteria and limitations, so it is advisable to consult a tax professional to determine if you qualify for them.

New York Capital Gains Tax

So, does New York have a capital gains tax on real estate? The short answer is yes, and it applies to profits earned from selling or transferring property. The tax rates vary depending on when the property was owned and the taxpayer's income level. However, exemptions and deductions are available to taxpayers to reduce their tax liability. It is important to consult a tax professional or the New York Department of Taxation and Finance for the latest information and determine eligibility for exemptions or deductions.

If you buy, sell, or transfer property, you should learn about the applicable taxes. Our My Real Estate Trend resource can help you better understand real estate transfer tax in New York.