I am often retained by out of state residents selling real property in New York who inquire about their tax liability in connection with the sale. New York State does impose an income tax on non-residents selling New York real property when the seller realizes a taxable gain on the sale of the property.
The taxable gain is determined by subtracting your cost basis from your sale price. There are many factors which go into determining your cost basis, such as whether you bought or inherited the property, the expenses you incurred in purchasing and selling the property and the cost of improvements to the property. In addition, there are certain exclusions which apply which may offset or eliminate any gain. The most common exclusion applies to individuals and married couples who occupied the property as their primary residence for two out of the past five years prior to the sale. In such a case there is a $250,000.00 exclusion for an individual and a $500,000.00 exclusion for a married couple.
If it is determined that there will be a taxable gain upon the sale of the real property, you will need to make an estimated payment of New York State tax at the closing by filing New York State tax form IT-2663 along with the deed and other documents.
If you plan on selling real property in New York State and are a non-resident you should consult with a professional well in advance of the closing in order to determine your New York State income tax liability,