New York Form IT-2663 for a 1031 Exchange

IT-2663 is estimated income tax collected at recording, not a separate tax

Tax Law section 663 requires a nonresident who sells New York real property to estimate the personal income tax on the gain and pay it before the deed is recorded. The rate is the highest rate in section 601 for the year, and the 2026 form prints it on line 19 of the worksheet: 10.90%. The recording officer collects the form and the check and sends both to the Tax Department.

The instructions are blunt about the gate this creates. Any deed for a fee simple interest from an individual, estate or trust should not be recorded unless each transferor has signed Form TP-584, Schedule D, or presents Form IT-2663 with full payment of the estimated tax due, if any. Residents sign Part 1 of Schedule D and are done; nonresidents who fit one of the section 663(c) exemptions (principal residence, foreclosure, government transferor) sign Part 2.

An exchanging nonresident does not fit a Schedule D exemption, because section 663(c) and Schedule D say nothing about nonrecognition. That is why the IT-2663 itself carries the exchange box. Each nonresident seller files a separate IT-2663 with a separate check; a married couple may file one. Overpayments come back only on the 2026 income tax return, never before it.

A like-kind exchange goes in Part 3, box 4B, with a one-paragraph summary

Part 2 of the form opens with a note: if the seller is not required to recognize any gain or loss on the transfer under the Internal Revenue Code (other than section 121), do not complete Part 2 or the worksheet, and continue with Part 3. Part 3 certifies that the seller is a nonresident who is not required to pay estimated tax, and box 4B is the reason: the seller is not required to recognize any gain or loss with respect to the transfer under provisions of the IRC.

The instructions use an exchange as their example. If you exchange real property for real property of a like kind and no gain or loss is recognized under section 1031 (you will file federal Form 8824), mark box 4B, give a brief summary of the exchange and indicate that the transaction is a section 1031 like-kind exchange. The summary box asks for the Code section and the facts supporting the claim, so two or three sentences naming the qualified intermediary arrangement, the relinquished property and the intent to acquire like-kind replacement property within 180 days are enough.

Then finish the form as if money were due. Line 3 of Part 2 gets a zero, the IT-2663-V voucher on page 3 is completed with a zero payment, and the seller signs Part 4; an agent with a power of attorney may sign instead. Tell the closer early that the deed package needs an IT-2663 rather than a Schedule D signature, because the qualified intermediary's paperwork and the state form have to describe the same transaction.

Boot, partial exchanges and failed exchanges still owe the 10.90%

Box 4B is an all-or-nothing certification. If you will take cash or other boot at closing, you are required to recognize gain, so you complete the worksheet instead. Line 18 asks for the gain that will be reported on your 2026 federal return, which for a partial exchange is the recognized portion, and line 20 applies 10.90% to it.

Hypothetical: a nonresident sells a Brooklyn mixed-use building for $2,000,000 with an adjusted basis of $900,000, and $150,000 of the proceeds comes to the seller rather than the intermediary. Gain reported federally for 2026 is $150,000, so the IT-2663 payment is $16,350. With no boot the same sale pays nothing at recording. Run your own numbers with your CPA, because the worksheet also pulls in depreciation and selling expenses.

If the exchange fails after the deed records, the certification was true when made and New York has no second IT-2663 to file. The gain becomes reportable on your nonresident return for the year it is recognized, and the ordinary estimated tax rules apply through Form IT-2105; the IT-2663 instructions point to the same voucher for gain that lands after 2026. A sale late in the year that fails in the next one raises the straddle-year question for the state as well as the IRS.

Co-op shares use Form IT-2664, and the exemption works the same way

IT-2663 is only for fee simple interests. A nonresident selling shares in a cooperative housing corporation with the proprietary lease files Form IT-2664, Nonresident Cooperative Unit Estimated Income Tax Payment Form, instead. The structure mirrors IT-2663: the same 2026 window, the same rate, the same box 4B for a seller who is not required to recognize gain or loss.

The filing path is different. IT-2664 is filed with Form TP-584 and mailed to the Tax Department, with any payment, within 15 days of the delivery of the instrument effecting the transfer; there is no county recording officer in the chain. Build those 15 days into the exchange calendar so the state form is not forgotten once the closing is over.

Transfer taxes are a different form and carry no exchange exemption

The exchange box on IT-2663 does nothing for transfer taxes. The state real estate transfer tax is $2 for each $500 of consideration, paid by the grantor, with additional rates for New York City conveyances of $2 million (non-residential) or $3 million (residential) and more, and the 1% mansion tax paid by the buyer on residences of $1 million or more. New York City adds its own Real Property Transfer Tax: 1.425% on most residential sales over $500,000 and 2.625% on all other property over $500,000, due with the return within thirty days of the transfer.

None of the exemptions on those forms mention section 1031, so the exchange cost model should carry the transfer taxes as closing costs; whether they can be paid from exchange funds without boot is covered under closing costs paid from exchange funds. The forms themselves are TP-584 outside the city and TP-584-NYC inside it, and both carry the Schedule D residency certification discussed above.

Once the IT-2663 is in the deed package, New York has no further form that follows deferred gain to replacement property in another state, which matters if the replacement is a Delaware Statutory Trust interest holding property elsewhere.