A 1031 exchange in New York lets you sell investment real estate and reinvest in like-kind property while deferring the tax on the gain. The federal rules apply the same way everywhere. What makes New York demanding is the size of the state tax it lets you defer, and a nonresident withholding step at closing that catches sellers who have already left the state. New York taxes the gain as ordinary income at up to 10.9%, and New York City residents add a city income tax on top, so the combined exposure rivals anywhere in the country. We act as your qualified intermediary and handle the documentation so the exchange holds from sale to closing.
Table of contents
- How much is capital gains tax on real estate in New York?
- New York's IT-2663 nonresident withholding
- New York 1031 exchange rules and timeline
- Why your qualified intermediary matters in New York
- 1031 exchanges across New York markets
- Selling New York and reinvesting elsewhere
- Common New York 1031 exchange mistakes
- Start your New York 1031 exchange
- Frequently asked questions
How much is capital gains tax on real estate in New York?
New York has no separate, lower rate for capital gains. It taxes the gain as ordinary income, with a top state rate of 10.9%. If you live in New York City, the city imposes its own income tax of up to roughly 3.876% on the same gain, so a New York City resident at the top can face a combined state and city rate near 14.8% before any federal tax. Yonkers residents pay a smaller city surcharge as well.
Stack the federal tax on top and the case for an exchange is clear:
- Federal long-term capital gains at 0%, 15%, or 20%, with the 20% rate applying above $545,500 of taxable income for single filers and $613,700 for married couples filing jointly in 2026.
- The 3.8% Net Investment Income Tax above $200,000 of modified adjusted gross income for single filers, $250,000 for married couples filing jointly.
- Depreciation recapture, taxed as unrecaptured Section 1250 gain at up to 25%.
- New York state tax up to 10.9%, plus city tax for New York City and Yonkers residents.
New York conforms to Section 1031, so a properly structured exchange defers the federal and the New York tax. The federal mechanics, the 45-day identification window, the 180-day closing deadline, and the qualified intermediary requirement, are covered in our main 1031 exchange guide. This page focuses on New York.
New York's IT-2663 nonresident withholding
This is the step that surprises sellers who have moved out of state. When a nonresident of New York sells New York real estate, the state collects an estimated tax payment at closing on Form IT-2663, computed on the gain at the top state rate. It is not an extra tax, it is a prepayment, reconciled when you file your New York nonresident return, but it pulls cash at the table.
In a 1031 exchange you avoid the IT-2663 payment by certifying on the form that the transfer is a like-kind exchange in which no gain is recognized. Your intermediary's documentation supports the certification, and the closing agent coordinates it. If the certification is not in place, the estimated payment is collected and then has to be recovered on your return, which both ties up capital and can starve the cash your intermediary needs to fund the purchase. New York City and New York State transfer taxes, and the residential mansion tax on higher-value sales, apply separately from income tax and are not deferred by a 1031.
New York 1031 exchange rules and timeline
The federal deadlines govern, and they are strict:
- 45-day identification. Identify replacement property in writing within 45 days of the sale.
- 180-day closing. Close within 180 days of the sale, or by your return due date including extensions, whichever is earlier.
- No constructive receipt. Proceeds go to your qualified intermediary, never to you.
- Equal or greater value and debt. Reinvest all net proceeds and match or exceed the relinquished value and debt, or the shortfall is taxable boot.
- Same taxpayer. The entity that sold must be the entity that buys.
- New York reporting. The exchange goes on federal Form 8824, and the IT-2663 certification handles the withholding at closing.
Why your qualified intermediary matters in New York
A 1031 exchange is only valid if a qualified intermediary holds the proceeds, and the intermediary cannot be a disqualified person such as your agent, attorney, or a relative. In New York the intermediary also coordinates the IT-2663 certification with the closing agent so the nonresident withholding is not collected unnecessarily. We hold exchange funds in segregated, bonded accounts and work with you directly from your first call through closing, including the IT-2663 coordination.
1031 exchanges across New York markets
New York City carries the bulk of the state's exchange volume, in multifamily, mixed-use, and commercial property across Manhattan, Brooklyn, Queens, and the Bronx. Two local factors shape replacement-property strategy here. First, rent-stabilized buildings carry regulatory limits that affect value and underwriting, and many investors exchange out of stabilized assets into unregulated or out-of-state property. Second, the city's transfer taxes and mansion tax raise transaction costs on higher-value deals, separate from the income tax an exchange defers. Outside the city, Long Island, Westchester, and the Hudson Valley draw multifamily and commercial demand, and the upstate markets of Buffalo, Rochester, Syracuse, and Albany offer higher yields at lower entry prices. Upstate also carries some of the highest effective property tax rates in the country, which belongs in your replacement-property math.
Selling New York and reinvesting elsewhere
A large share of New York exchange activity is investors reinvesting in lower-tax states, most often Florida and the Carolinas, following the same migration as residents. New York conforms to the exchange and defers the tax, but be aware that New York taxes New York-source gain when it is ultimately recognized, so a future taxable sale of the replacement property can still draw New York's attention to the original deferred gain. It is not the formal annual-filing clawback that California runs, but the New York-source gain does not simply vanish because you moved. Our New York to Florida guide covers that corridor in detail.
Common New York 1031 exchange mistakes
- Not filing the IT-2663 exchange certification, so the nonresident estimated payment is collected and tied up.
- Taking receipt of the proceeds, even briefly, which disqualifies the exchange.
- Missing the 45-day identification window.
- Trading down or pulling cash out, which creates taxable boot.
- Budgeting a replacement deal without New York City's transfer and mansion taxes, or without upstate property tax, both of which sit outside the exchange.
Start your New York 1031 exchange
Set up your exchange before your relinquished property closes, so the IT-2663 certification is in place at the table and the proceeds never reach your hands. Contact our team to begin, or to talk through a specific deal.
Frequently asked questions
How much is capital gains tax on real estate in New York?
New York taxes the gain as ordinary income at up to 10.9%, and New York City residents add a city income tax of up to about 3.876%. That is on top of federal capital gains tax, so combined exposure for a New York City seller can approach 38% or more of the gain.
Does New York have nonresident withholding on a property sale?
Yes. A nonresident selling New York real estate makes an estimated tax payment at closing on Form IT-2663. In a 1031 exchange you certify on the form that no gain is recognized, which avoids the payment.
Does New York conform to federal 1031 rules?
Yes. A properly structured exchange defers both the federal and the New York tax. New York is not a formal clawback state, but it taxes New York-source gain when it is eventually recognized.
Can I do a 1031 exchange from New York to Florida?
Yes, and it is common. The exchange defers your federal and New York tax. Because Florida has no state income tax, your future rental income and eventual sale there carry no state tax, though New York can still reach the original New York-source gain on a later taxable sale.
Do I need a qualified intermediary for a New York 1031 exchange?
Yes. The intermediary must hold the proceeds and facilitate the exchange, and in New York also coordinates the IT-2663 certification. Engage one before the relinquished property closes.
This page is general information, not tax or legal advice. We act as a qualified intermediary and do not provide tax or legal advice. State, city, and federal rules and thresholds change; confirm current figures with your tax advisor.
