There are many foreign investors interested in purchasing property in New York City, which is increasingly the engine that drives the real estate industry here. However, before attempting to purchase a real estate property, a purchaser should be aware of some simple rules of thumb before they make an offer. For purchases over $1,000,000, there is a “mansion tax” of 1%. For some properties and new developments, the developers of the property might require a buyer to pay “transfer taxes,” which are charged both at the city and state levels. New York City charges a 1% tax for sales under $500,000 and 1.425% for sales above that price. The state of New York’s transfer tax is a flat 0.4% for all sales. This is not something buyers will be responsible to pay if their property is not a newly developed. Buyers who are securing financing for their purchase will also find that the lender will be responsible for a “mortgage recording tax” of 0.25%. For sales under $500,000, that tax totals 2.05% (1.8% to be paid by the buyer), and for all other sales the tax is 2.175% (so 1.925% to be paid by the buyer).
Estate Tax Consequences
There are some differences to be aware of in the terms of estate tax. If it is a foreigner who is not a US citizen nor a permanent resident, i.e. green card holder, he or she will be subject to hefty federal and state estate taxes, which means the property cannot be sold unless the estate pays off the estate taxes due within nine months after the death of a loved one. It’s a crucial bit of information that is easy to overlook and it’s something that any foreign purchaser should be aware of.
Federal tax deferral program does not apply to foreigners
For any foreign investors purchasing property in New York City, there are no restrictions as to how many properties or what type of property they can buy. However, when foreigners try to sell the property in the future, they are not eligible to utilize the federal tax code (IRC Code Section 1031) that is known as “Section 1031 Exchange”. This tax code is to benefit investors who are selling property for profit. They do not have to pay capital gains right away if they can purchase another real estate investment property and close the title within 180 days. However, this tax benefit rule does not apply to foreigners.
Capital Gain Tax
A foreign seller has to file federal capital gain tax at the closing table, no matter whether the sale results in a profit or a loss. A foreign seller will have to pay a federal capital gain tax of 10% of the selling price to the US Treasury. At the end of the year, when the foreign seller prepares their personal tax return, they will be able to get back any amount overpaid or pay any balance due on the personal capital gain tax. This is quite different from a domestic seller.
There are a lot of benefits for foreigners purchasing property here, especially in the New York City area because the property value is booming, the rental income is pretty stable and with the higher demand for inventory in the future, it is foreseeable for the near future that property values will continue to increase. Each foreign national, however, should thoroughly discuss the pros, the cons, and the tax consequences with their real estate attorney and accountant before they make an offer or sign the contract.
Menicucci Villa Cilmi PLLC is proud to work with the rapidly growing Chinese community in New York City. Call us today if you have any questions about buying property as a foreign national. Jackie Huang speaks Shanghainese, Cantonese, and Mandarin and she can help you cut through the red tape and assist you and your family when buying a home, co-op, or a condo.
第二个就是联邦的投资人延税计划1031 exchange. 外国人在纽约州买房子，买在哪里，买多少，