Who pays property taxes when closing in New York? The seller – who owned the property during the time the taxes were incurred, is typically responsible for paying property taxes at the time of closing. However, the responsibility can be shifted to the buyer with mutual agreement. If the buyer receives a tax bill for the period the seller occupied the property, they may be responsible as current owners of that property. They can reach out to the seller to pay the bill or even have this as part of the contract at the time of closing (so the seller can leave money in the escrow). When dealing with responsibility for New York City tax, understanding the timeline of when taxes were incurred becomes crucial. Buyers should also be aware of any outstanding municipal charges that might follow them after the closing. It is advisable for both parties to communicate openly about any tax obligations to avoid unexpected financial burdens later on.
Then there are taxes specific to the transaction itself, i.e., property changing hands. Both buyers and sellers have their own taxes.
The sellers have to pay transfer tax to both state and the city and the collective number can be as high as 2.075% for properties going for more than $3 million but for the majority of the seller’s, it’s around 1.825% of the sales price. In addition to transfer tax, sellers in New York should also be prepared for various seller closing costs, including attorney fees, title insurance, and other potential charges. These additional expenses can significantly impact the net proceeds from the sale, making it essential for sellers to budget accordingly. Understanding the full scope of seller closing costs in New York will help ensure a smoother transaction process.
For buyers who purchase properties of more than $1 million, there is something called the mansion tax. It starts at 1% and increases as the value of the purchase increases.
It’s important to understand that while these taxes are tied to the property in a way, they are not property taxes per se. They are tied to the transaction of the property changing hands, whereas property taxes apply more to the ownership of the property. The only problematic period is around closing.
If the tax bill applies right before a seller vacates the premises and the property has been transferred to the buyer, it’s easily the seller’s responsibility. However, if the tax bill is due after closing when the seller has lived there for the tax period but the property is now in the buyer’s name, the responsibility for property tax should be discussed and added to the terms of the closing.
