|Posted on February 23, 2022 at 5:20 PM|
Before you decide to sell your house in New York, it makes sense to research the accompanying taxes and fees you may need to pay. Most sellers’ principal concern is how they should price the home. That is why most sellers seek the help of a real estate agent that has experience with listing in their market. Yet, apart from finding the best Realtor, you should also consider other expenses you might be subject to, such as your real estate agent's commission, applicable taxes, and fees. To make an informed decision, we are going to give you a run-through of the taxes on selling a house in New York, as well as valuable pointers on how you can make the most out of the sale.
What taxes do I need to pay when selling a house in New York?
Capital gains taxes in New York
This is the first tax you need to watch out for before putting your New York property on sale. Capital gains are the combined profit you stand to earn when your real estate agent closes the purchase. In other words, it is the difference between the asking price or the negotiated selling price and the final purchase price.
Next to capital gains, you should also consider the compensation your real estate agent is entitled to. After you pay the taxes, your real estate agent takes a percentage of the profit you have agreed upon.
Fortunately, you can keep part of the commission by working with Top Agent Rebate that will get you back as much as 15% of the commission after the closing costs are settled.
What influences the capital gains taxes in New York?
A couple of factors and conditions will influence the capital gains tax. For example, the percentage will vary depending on the property's condition. It can also change depending on whether the buyer is a legal US resident. Other influencing factors include deductions due to fees you have to pay for the loan application and closing costs.
If you put aside these factors, the capital gains tax for legal US residents in New York is around 15%. If the house is in the New York City area, you will have to pay an additional 10%. Make sure you report the capital gains tax appropriately. You should find it in your IRS form listed under Schedule D.
Are there any exemptions to the capital gains tax in NY?
In some cases, you are eligible to qualify for an exemption. If the house you put up for sale was your primary residence for two years in the last five years, the capital gains tax cannot be higher than $250,000 for an individual. If you are selling your home as a married couple, then the capital gains tax cannot exceed $500,000.
Accordingly, it makes sense to make your New York property your primary residence for at least two years before the sale. This will allow you to reinvest the capital into other expenses that await you after the sale, such as relocation costs. Many people think that they can save money by relocating themselves, but according to Clean Cut Moving, DIY relocations end up more expensive. There is no compensation if anything happens to your belongings, and no one can precisely calculate the value of the time you would lose.
Tax exemption due to unforeseen circumstances
You also qualify for a tax exemption if you have to sell your home due to unavoidable or unforeseen circumstances. These range from personal reasons such as divorce, death, health problem, job loss, or promotion to situations you have no control over, such as natural disasters, abuse, or terrorism.
Furthermore, if you served in the Army, Navy, or National Guard, you can fulfill the two-year primary residence condition for reducing your capital gains tax responsibilities within a 10-year time period instead of five.
A tax exemption based on the value of your new home
Finally, if you purchase your new home at an equal or higher price within 180 days after selling your New York property, you can ask for an exemption by filing the respective form with the IRS so that your new purchase is registered. Note that your new property must be in one of the continental US states. In any case, you can find out more about valid reasons for receiving a tax exemption in the IRS Publication 523.
If you need help with relocating from NYC, make sure you hire a moving service that can assist you in the process as soon as you sell your house.
Non-US Resident Real Estate Seller Tax
If you are a non-US resident selling a New York property you owned for over a year, you are subject to withholding for tax purposes amounting to 30% of the selling price. New York state withholds 6.85% of the price, while the IRS takes 10%.
Your real estate agent must forward the given amount to the IRS within 20 days after the closing date. One way to dodge paying the Foreign Investment in Real Property Tax Act (FIRPTA) is to sell the house through your Limited Liability Company (LLC) since this tax applies to individuals only.
Mortgage Tax Advantages in New York
If you purchase a new home in New York, you can use mortgage tax advantages. More specifically, the interest you have to pay will be tax-deductible. In sum, the amount that gets taxed will be lower. However, be sure to consult a tax professional to find out more about the limits, details, and conditions related to this advantage and other taxes on selling a house in New York.
Taxes on Selling a House in New York Made a Bit Simpler
Nothing is simple and easy when it comes to taxes on selling a house in New York. Therefore, it is always advisable to work with reliable professionals who can guide you and ensure you don't make any costly mistakes. While a real estate agent's commission will take a portion of your profit, the help they can provide is invaluable. Plus, you can lower this cost thanks to the rebate you can get.
Written by: Lisa Roberts with US Moving Experts