The short answer
Neither New York State nor New York City exempts a section 1031 exchange from transfer tax. On a sale in the five boroughs the seller pays the state's base tax of $2 per $500 (0.4%), the additional base tax of $1.25 per $500 (0.25%) on commercial property of $2 million or more or residential property of $3 million or more, and the city's RPTT of 1.425% or 2.625% on most property over $500,000. The buyer pays the 1% mansion tax and the supplemental tax of 0.25% to 2.9% on residential property of $2 million or more. These are exchange expenses paid from the proceeds, and in a reverse exchange the state has ruled that the second transfer from the accommodation titleholder is not taxed.
At a glance
| State base tax | $2 for each $500 of consideration (0.4%), paid by the grantor under Tax Law section 1404 |
|---|---|
| State additional base tax | $1.25 per $500 (0.25%) in New York City on residential property of $3 million or more and other property of $2 million or more |
| Mansion tax | 1% of consideration on residential property of $1 million or more, paid by the grantee |
| Supplemental tax | 0.25% at $2 million rising to 2.9% at $25 million or more on NYC residential property, paid by the grantee |
| NYC RPTT | 1% or 1.425% on 1-3 family homes, condos and co-ops; 1.425% or 2.625% on all other property, the break at $500,000 |
| Timing | RPTT return NYC-RPT and payment within 30 days of the transfer through ACRIS; state Form TP-584-NYC with the deed |
| Exchange exemption | None; the exemption lists in Tax Law section 1405 and the city's RPTT do not mention like-kind exchanges |
| Reverse exchange | TSB-A-16(2)R: the conveyance from an exchange accommodation titleholder to the exchanger is not subject to the state transfer tax |
A New York City sale carries up to four transfer taxes, none deferred by section 1031
The state tax comes first. Tax Law section 1402 imposes a tax on each conveyance where consideration exceeds $500 "at the rate of two dollars for each five hundred dollars or fractional part thereof." In a city of one million or more, an additional $1.25 per $500 applies when residential consideration is "$3 million dollars or more" or other property is "$2 million dollars or more."
Residential buyers face two more. Section 1402-a adds 1% where residential consideration "is one million dollars or more," and section 1402-b layers a supplemental tax in the city from one-quarter of one percent at $2 million up to two and nine-tenths percent at $25 million or more. Together the buyer's rate runs from 1.25% to 3.9%, the table printed in the TP-584-NYC instructions.
The city's Real Property Transfer Tax is the largest line. The Department of Finance's RPTT page sets 1% on residential property of $500,000 or less and 1.425% above that, and 1.425% or 2.625% on all other property at the same break. Consideration includes mortgages taken subject to, so a leveraged building is taxed on its full price, and the exchange is irrelevant to every one of these computations.
The seller pays the state and city taxes; the buyer pays the mansion and supplemental taxes
Tax Law section 1404 says the section 1402 tax "shall be paid by the grantor," and that if the grantor fails to pay or is exempt, the grantee becomes liable, with joint and several liability. The TP-584-NYC instructions confirm that "the base tax and additional base tax are paid by the grantor" and that the mansion tax and the supplemental tax are paid by the grantee, except as the contract provides otherwise.
The city follows the same pattern: the RPTT is the grantor's tax, with the grantee stepping in if the grantor does not pay or is exempt, and the return is due within thirty days of the transfer. Late filing carries 5% a month to a 25% cap, and late payment 0.5% a month, under the schedule on the Department of Finance page.
Because every one of these taxes is a cost of the transfer, they belong on the settlement statement as exchange expenses. Paying them from the proceeds held by the qualified intermediary does not create boot, as explained on closing costs paid from exchange funds; whether they are deducted or added to basis is on exchange fees, deductible or basis.
A worked example on a $4 million building and a $4 million condo
Hypothetical, commercial: a Brooklyn mixed-use building sells for $4,000,000 inside an exchange. The seller owes state base tax of $16,000 (0.4%), additional base tax of $10,000 (0.25%, because the property is not residential and the price is at least $2 million) and RPTT of $105,000 (2.625%). That is $131,000, or about 3.3% of the price, leaving the intermediary before anything is reinvested. The buyer owes nothing to the state or city on the deed.
Hypothetical, residential: a Manhattan condo held as a rental sells for $4,000,000. The seller pays $16,000 base tax, $10,000 additional base tax (residential at $3 million or more) and $57,000 of RPTT at 1.425%, a total of $83,000. The buyer pays the 1% mansion tax of $40,000 plus the supplemental tax at one-half of one percent in the $3 million to $5 million tier, $20,000, for $60,000. Run your own numbers with your CPA.
The lesson for exchange planning is that the seller's side on a New York City sale is routinely 3% or more of the price. Model it before you commit to a replacement price, because the equity that reaches the intermediary is the price less the loan payoff and these taxes; the broader math is on the 1031 exchange equation.
Reverse exchanges: the state has ruled on the second transfer, the city has not
In a reverse exchange an exchange accommodation titleholder takes title to the replacement property first, under the safe harbor of Rev. Proc. 2000-37, and later conveys it to you. Two deeds means two potential transfer tax events. The state addressed the second one in TSB-A-16(2)R: "the conveyance of real property from an EAT to the exchangor as part of a 'reverse' like-kind exchange under the facts below is not subject to RETT."
The opinion rests on the EAT acting as the exchanger's agent, using none of its own funds and reporting no gain or loss, and notes that transfer taxes are paid on the first conveyance, the seller's deed to the EAT. It is an advisory opinion on the petitioner's facts, so your accommodation agreement should match them: agency language, a loan from you for the full price, a lease back to you during the parking period, and transfer at no gain.
The city's RPTT has its own exemption list, which includes transfers between principal and agent and transfers that do not change beneficial ownership, but no published city ruling on EATs was located for this page. Ask counsel for the city position before structuring, and weigh the cost against a forward exchange, where direct deeding under Reg. section 1.1031(k)-1(g)(4)(iv) means the intermediary never takes title and no extra deed exists. The structure is set out on the reverse 1031 exchange guide.
Where the transfer taxes fit with IT-2663 and the rest of the New York closing
Transfer tax is paid with the deed and is not the same thing as the nonresident estimated income tax that New York collects at recording. That second item is handled on Form IT-2663, where a section 1031 seller marks the exchange box and pays nothing, and it is covered on New York Form IT-2663 for a 1031 exchange. A nonresident selling in the city needs both forms at the table.
The exemptions that do exist are narrow. Tax Law section 1405 excludes conveyances that secure a debt and conveyances "to effectuate a mere change of identity or form of ownership or organization where there is no change in beneficial ownership," which matters for moving a property into a single-member LLC before an exchange, not for the exchange itself.
New York's income tax treatment of the deferred gain, including the 10.9% top rate and the city's own resident income tax, is on 1031 exchange rules in New York.
Related questions
Can the transfer taxes be paid out of the exchange funds without creating boot?
Yes. Transfer taxes are transactional costs of the sale and are treated as exchange expenses on the settlement statement, reducing the amount realized rather than producing taxable boot.
Does the additional base tax apply to a $2.5 million apartment building?
Yes. A multifamily building that is not a one- to three-family house, condo or co-op is other property, and the $1.25 per $500 additional base tax applies at $2 million or more.
Who pays the mansion tax if I am buying a rental condo as replacement property?
The grantee pays the 1% mansion tax and, at $2 million or more, the supplemental tax; the tax turns on the property being residential, not on whether you will live there.
Is the DST I buy with the proceeds subject to New York transfer tax?
Only if the trust holds New York real property and the acquisition of your interest is a conveyance of a controlling interest. A fractional interest in a trust owning property in other states is outside New York's tax.
Does moving the property into an LLC before the sale trigger transfer tax?
A conveyance that is a mere change of form with no change in beneficial ownership is exempt under section 1405(b)(6), but the returns are still filed and the later sale by the LLC is fully taxable.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.
- New York Tax Law section 1402, Imposition of real estate transfer tax
- New York Tax Law section 1402-a, Additional tax (mansion tax)
- New York Tax Law section 1402-b, Supplemental tax in cities of one million or more
- New York Tax Law section 1404, Liability for tax
- New York Tax Law section 1405, Exemptions
- New York State Department of Taxation and Finance, Real estate transfer tax
- Instructions for Form TP-584-NYC (8/25)
- New York City Department of Finance, Real Property Transfer Tax (RPTT)
- New York State Advisory Opinion TSB-A-16(2)R, conveyance from an exchange accommodation titleholder
- Rev. Proc. 2000-37, reverse exchange safe harbor
- Reg. section 1.1031(k)-1, Treatment of deferred exchanges