Tax issues for foreign nationals when purchasing property in New York City.

//Tax issues for foreign nationals when purchasing property in New York City.

Tax issues for foreign nationals when purchasing property in New York City.

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,买什么样的房子都没有任何的限制。但是如果外国人要出售的时候,他们是不能够用享受联邦的1031 exchange 延税计划来延迟支付投资利润增值所得税。也就是说,如果出售的时候房子有利润,国内的业主是不需要马上支付增值所得税,而是通过重新再购买一个投资房,就可以延迟支付这个增值所得税。但是该购入的房子的交易必须在第一个出售的房子过户以后180之内完成。但是这个规定外国人是不享有的。




在纽约市购买投资房产的话,其实也是一个比较受到全世界投资人热衷的投资的方式。房产比较保值,,租金收入相对来说也是比较稳定的,在将来的话也是对这个房子的需求也是比较大的。但是提醒所有的外国投资人必须要跟他们的律师,会计师进行深入的讨论和咨询,关于这个在美国投资的好处,不好的地方以及所有的税务的后果。然后再确定说到底要不要购买,或者是签署合同。这才是一个信息全面的决定informed decision

real estate law and business law of counsel
June 6th, 2018|Uncategorized|