The short answer
New York follows the federal like-kind rules, so gain deferred under IRC §1031 is not taxed by New York State or New York City in the year of the exchange. A nonresident selling New York property normally prepays estimated tax at 10.9% of the gain through Form IT-2663 when the deed is recorded, but an exchange seller instead marks the §1031 box in Part 3 and pays nothing. Transfer taxes are the exception: the state's 0.4% base tax and, inside the city, the RPTT are due on the relinquished sale whether or not it is an exchange.
New York at a glance
| State tax on real estate gains | Ordinary rates to 10.9%; the 9.65% bracket starts at $1,077,550 single, $2,155,350 joint |
|---|---|
| New York City resident tax | Up to 3.876% on top of state tax; no credit against it for taxes paid to other states |
| Nonresident prepayment | Form IT-2663 at 10.90% of gain at recording; §1031 sellers mark Part 3, box 4B and pay $0 |
| State transfer tax | $2 per $500 (0.4%) paid by the seller; 1% mansion tax on homes of $1M+ paid by the buyer |
| NYC RPTT | 1% or 1.425% for 1–3 family homes, condos and co-ops; 1.425% or 2.625% for other property |
| Deferred-gain tracking | None; New York has no form that follows deferred gain to out-of-state replacement property |
| Co-op shares | Real property under Treas. Reg. §1.1031(a)-3; nonresidents certify on IT-2664, not IT-2663 |
IT-2663 lets a nonresident exchange seller skip the 10.9% prepayment at recording
When a nonresident individual, estate or trust sells real property in New York, the seller normally hands the county recording officer Form IT-2663 with a check for estimated tax on the gain, computed at the state's highest rate, which is 10.90% for tax year 2026. The deed will not be recorded without either that form and payment or a signed exemption certification on Schedule D of Form TP-584 (TP-584-NYC inside the city).
An exchange seller does not pay. The 2026 instructions say that when no gain or loss is recognized under IRC §1031, you skip the Part 2 worksheet, mark box 4B in Part 3, write a brief summary of the exchange, and still complete the IT-2663-V voucher showing zero.
Two limits matter. The form must still be presented at recording, and the exemption is written for a fully nonrecognized transfer; if cash or net debt relief will show up as recognized gain on federal Form 8824, work out the estimated payment on that recognized portion with your CPA before the deed is presented, not after.
New York State residents are outside Tax Law §663 entirely and never file IT-2663, and shares in a cooperative apartment go on a different form, IT-2664. The federal side of the transaction is explained on the 1031 basics page.
New York taxes a recognized gain at ordinary rates, and NYC adds up to 3.876%
New York has no preferential capital gains rate. Gain recognized on a New York property is taxed with the rest of your income under the 2026 schedule, which starts at 3.9% and reaches 6.85% at $215,400 for a single filer ($323,200 joint), 9.65% at $1,077,550 ($2,155,350 joint), 10.3% above $5 million and 10.9% above $25 million.
New York City residents pay the city's own income tax on top, with a top rate of 3.876% that begins at $50,000 of city taxable income for single filers and $90,000 for joint filers. A recognized gain on a Manhattan building can therefore face a combined state and city marginal rate above 14%.
Nonresidents owe New York tax only on New York-source income, and the IT-2663 regime exists because gain from real property located in the state is always New York-source. Deferral under §1031 removes both the prepayment at recording and the return-year tax in one step.
State transfer tax, NYC RPTT and the mansion tax are due on the relinquished sale, exchange or not
The state real estate transfer tax is $2 for each $500 of consideration, or 0.4%, and the grantor pays it; if the seller is exempt or does not pay, the buyer must. Nothing in the transfer tax rules treats a deed delivered in a like-kind exchange differently, so the tax is part of your closing costs on the relinquished property.
Inside New York City, conveyances since July 1, 2019 carry an additional base tax of $1.25 per $500 when residential consideration is $3 million or more or nonresidential consideration is $2 million or more. The city's own Real Property Transfer Tax adds 1% (up to $500,000) or 1.425% for one- to three-family homes, condos and co-ops, and 1.425% or 2.625% for all other property, reported on Form NYC-RPT within 30 days; the Department of Finance can docket a judgment against either party if it goes unpaid.
On the replacement side, a buyer of a residence at $1 million or more pays the 1% mansion tax statewide, and in the city a supplemental tax on residential purchases of $2 million or more that rises in steps from 0.25% to 2.9%. Both are buyer's taxes, so they matter if your replacement property is a New York residential asset rather than a DST.
The reporting forms are TP-584 outside the city and TP-584-NYC inside it, due within 15 days of delivery of the deed. Schedule D of that form is also where a resident, or an exempt nonresident, certifies exemption from the IT-2663 prepayment.
Co-op shares exchange like real estate, but New York routes nonresidents to IT-2664
Stock in a cooperative housing corporation is listed as real property in Treasury Regulation §1.1031(a)-3, so an investment co-op in Manhattan or Brooklyn can be relinquished in an exchange and a co-op can be acquired as replacement property.
New York handles the paperwork differently for co-ops. The IT-2663 instructions send a nonresident selling co-op shares to Form IT-2664, the Nonresident Cooperative Unit Estimated Income Tax Payment Form, and the city's RPTT expressly applies to transfers of cooperative housing stock, so the closing will look like a real estate closing even though what changes hands is stock and a proprietary lease.
No deferred-gain tracking: New York lets the gain leave with the replacement property
New York has no equivalent of California's Form 3840. Once a New York property is exchanged for real estate elsewhere, no New York form tracks the deferred gain, and a nonresident's later taxable sale of the out-of-state property is not reported to New York at all.
A New York resident is in a different position because the state taxes residents on all income wherever earned. If you stay a resident and eventually sell the replacement property for cash, the gain, including the deferred New York gain carried in its basis, is taxed by New York State and, for city residents, by New York City; the deferral follows the taxpayer, not the parcel.
The federal 45-day and 180-day windows that make the deferral hold are unchanged by any of this; they are covered on our deadlines page.
NYC values income property from RPIE filings rather than from the closing price
New York City's Department of Finance values income-producing property each year from the income and expense data owners report on the RPIE statement, which is required when actual assessed value exceeds $40,000; the RPIE-2025 filing was due June 1, 2026. The sale price is not the direct input it is in states that reassess on transfer.
For an exchange buyer of a New York City building, the property tax burden is therefore driven by the building's own reported income going forward, which is worth modeling before you identify it as replacement property.
Replacement property
What a DST means for a New York seller: 10.9% and 3.876% follow residents, not the parcel
Most DST offerings hold property outside New York, and rental income from a DST is generally sourced to the state where the building sits. For a nonresident who exchanges New York property into such a DST, the New York obligations for that asset end: no IT-2663 next time, no New York-source income to allocate, and no New York tax on a later taxable sale of the DST interest.
A New York State resident keeps paying New York tax on the DST's income and on any gain later recognized, but can claim the resident credit on Form IT-112-R for income tax paid to the state where the DST property is located. That credit does not apply against New York City resident income tax, so a city resident should expect the 3.876% rate on DST income regardless of where the property is.
The exchange itself is unchanged: a DST beneficial interest is acquired as replacement real property, so the same IT-2663 box 4B applies at the relinquished closing. The traditional DST structure and its cash-out variant are explained on their own pages; confirm sourcing and credit questions with your CPA and the Department of Taxation and Finance.
Questions investors ask about 1031 exchanges in New York
Do I still file IT-2663 when my New York sale is a like-kind exchange?
Yes, if you are a nonresident. Leave the Part 2 worksheet blank, mark box 4B in Part 3 with a note that the transfer is an IRC §1031 exchange, complete the IT-2663-V voucher at zero, and present the form at recording; the TP-584 Schedule D certification is the alternative route for an exempt transfer.
What happens on IT-2663 if I take boot out of a New York exchange?
The box 4B exemption is written for transfers where no gain or loss is recognized. If cash or debt relief means part of the gain will be recognized on Form 8824, plan on estimated tax on that recognized portion at 10.90% and confirm the treatment with your CPA before closing.
Does the NYC mansion tax hit me if I buy a Manhattan condo as replacement property?
Yes. The 1% additional tax applies to any residential purchase of $1 million or more and is paid by the buyer, and inside the city a supplemental tax from 0.25% to 2.9% applies once the price reaches $2 million. Neither is triggered when the replacement property is a DST interest.
I live in Queens and exchange into a DST holding buildings outside New York. Who taxes the income?
New York State taxes it because you are a resident, with an IT-112-R credit for tax paid to the property's state. New York City taxes it as well, and the resident credit does not offset city tax.
Does New York claw back deferred gain if the replacement property is out of state?
No. New York has no deferred-gain tracking form; the deferred gain is taxed only if and when you recognize it, and for a nonresident that later recognition is outside New York's reach.
Are co-op shares eligible for a New York 1031 exchange?
Yes. Stock in a cooperative housing corporation is real property under the federal regulations, and a nonresident seller uses Form IT-2664 rather than IT-2663 for the estimated tax certification.
Sources
The rules above were checked against these publications on September 18, 2026. Rates and forms change; confirm the current version with your CPA and the New York tax agency before you close. This page is general information, not tax or legal advice.
- Instructions for Form IT-2663 (2026), NYS Department of Taxation and Finance
- Form IT-2663 (2026), worksheet line 19 rate
- Real estate transfer tax, NYS Department of Taxation and Finance
- Real Property Transfer Tax (RPTT), NYC Department of Finance
- Instructions for Form IT-2105 (2026), NYS and NYC rate schedules
- Instructions for Form IT-112-R, resident credit
- 26 CFR §1.1031(a)-3, definition of real property
- Real Property Income and Expense (RPIE), NYC Department of Finance