New York Capital Gains Tax on Real Estate

By Skyline Capital Investments · Updated October 26, 2026 · 7 min read

Does New York have a capital gains tax?

New York has no separate capital gains tax, but it taxes capital gains in full as ordinary income under Tax Law section 601. In 2026 that means a rate between 3.9% and 10.9%, depending on your total New York taxable income, and a gain from selling an apartment building can push most of that income into the higher brackets.

There is no exclusion or reduced rate for real estate held a long time. New York starts its income tax from federal adjusted gross income, so whatever gain the IRS sees, New York sees too, and it is taxed at the same rates as wages or rent. Owners who live in New York City also pay the city’s personal income tax on top of the state tax.

New York capital gains tax rates and brackets for 2026

For 2026, New York’s rates run from 3.9% on the first $8,500 of a single filer’s taxable income to 10.9% on income over $25,000,000. The full schedules are in Tax Law 601, and the table shows where each rate starts.

The 2026 New York income tax cuts

New York cut its five lowest income tax rates by 0.1 percentage point for 2026, under Chapter 59 of the Laws of 2025, the 2025-26 state budget. The 4% bracket became 3.9%, 4.5% became 4.4%, 5.25% became 5.15%, 5.5% became 5.4% and 6% became 5.9%. The Department of Taxation and Finance revised its withholding tables, effective for payrolls on or after January 1, 2026, to match.

The statute schedules a second step for tax years 2027 through 2032, when those five rates fall again to 3.8%, 4.3%, 5.05%, 5.3% and 5.8%. From 2033 the schedule drops back to seven brackets, with a top rate of 8.82%.

For a property seller, the 2026 cut is small. The 6.85%, 9.65%, 10.3% and 10.9% rates did not change, and those are the rates a large gain lands in. On a joint return the cut is worth at most about $323, which is 0.1% of the $323,200 of income below the 6.85% bracket. Timing a sale around the cuts will not move your tax bill much.

How New York tax stacks with federal capital gains tax

You pay New York tax and federal tax on the same gain, and the two are figured separately. Federal tax treats a long-term gain at preferential rates, while New York simply adds the gain to your other income.

Under Revenue Procedure 2025-32, the 2026 federal long-term rates are 0% up to $98,900 of taxable income on a joint return ($49,450 single), 15% up to $613,700 ($545,500 single), and 20% above that. Building depreciation you took is taxed federally at up to 25% as unrecaptured Section 1250 gain. The 3.8% net investment income tax applies to modified AGI over $250,000 joint or $200,000 single.

A seller with a seven-figure gain will usually pay 20% federal on most of it, 25% on the depreciation, 3.8% NIIT, and then New York’s 6.85% or higher on the whole amount. Combined, the top marginal rate on a New York apartment sale can pass 30% before any city tax.

Short-term and long-term gains in New York

New York taxes short-term and long-term gains the same way. Whether you held the building for eight months or eighteen years, the gain is ordinary income on your New York return at the rates above.

The holding period still matters on the federal side. A building held one year or less produces a short-term gain taxed at federal ordinary rates up to 37%, while a longer hold qualifies for the 0%, 15% and 20% rates. So the difference you feel from a longer hold comes entirely from the IRS. Residents report the gain on Form IT-201, which picks it up from federal AGI with no separate capital gains schedule for real estate.

Nonresident sellers: the IT-2663 payment at closing

If you live outside New York and sell New York real estate, you must file Form IT-2663 and pay estimated income tax when the deed is recorded. The rule covers nonresident individuals, estates and trusts, and the form goes to the county recording officer with the deed.

The payment for 2026 is your gain times 10.90%, the top state rate, whatever your actual bracket. If you have no gain, nothing is due. The payment is an estimate, not the final tax. It is credited against the tax on your New York nonresident return for the year, and if it is more than you owe, the difference comes back as a refund.

Because the rate is the top rate, most nonresident sellers overpay at closing and wait for the refund. On a $600,000 gain the check at recording is $65,400, even if your real New York tax works out closer to 6.85%. Plan for that cash to come out of your proceeds at the closing table, and ask your title company to build the payment into the settlement statement early so the recording is not held up.

• No payment is due when the sale produces no gain.
• A sale of a principal residence that fully qualifies under IRC Section 121 is exempt.
• Transfers in foreclosure or by deed in lieu of foreclosure are exempt.
• Certain transfers involving government parties are exempt.
• A transfer where no gain is recognized, such as a full 1031 exchange, is reported by checking box 4B, with no payment.

Depreciation recapture in New York

New York has no separate recapture rate. The depreciation you claimed is part of your federal gain, it flows into federal AGI, and New York taxes it at the same ordinary rates as the rest of the gain.

That makes New York simpler than the federal system, but not cheaper. Federally, unrecaptured Section 1250 gain is capped at 25% and any Section 1245 recapture from a cost segregation study is taxed at ordinary rates. In New York, all of it is just income. A building with $300,000 of accumulated depreciation adds $300,000 to your New York taxable income in the year of sale, on top of the price appreciation.

Worked example: selling a $2 million apartment building in New York

Take a married couple who live in New York State outside the city and sell a 16-unit building in Westchester County for $2,000,000 in 2026. They bought it in 2017 for $1,200,000 and have taken about $300,000 of depreciation. Selling costs are $100,000. Their other income is $600,000 a year, so they are already in high brackets before the sale.

The federal bill comes to about $253,000. New York adds roughly $68,500, for a total near $321,500, or about a third of the gain. The New York figure is a simplified estimate at the 6.85% rate, since their New York taxable income stays under $2,155,350. New York’s supplemental tax for high earners can change the exact amount, so have your CPA run the full return.

If the same couple lived in Florida, they would owe no state income tax at home, but the closing would still require an IT-2663 payment of $109,000 (10.90% of the $1,000,000 gain). They would then file a New York nonresident return and get back any amount above their actual New York tax.

How a 1031 exchange changes New York capital gains tax

A 1031 exchange defers New York tax as well as federal tax, because New York starts from federal AGI and follows the federal deferral. If the couple above trades into a $2,000,000 or larger replacement and reinvests all the net cash, the $321,500 is deferred and nothing is due in 2026.

New York has no clawback rule. California, Massachusetts, Montana and Oregon track gain that leaves the state in an exchange, but New York does not, so you can buy replacement property in another state without a New York filing that follows you. A nonresident seller doing a full exchange checks box 4B on Form IT-2663 and pays nothing at recording. Any cash you keep is boot, and that part of the gain is taxed by both governments in the year of sale.

Our guide to a 1031 exchange in New York covers the state filings, and the 1031 exchange rules page covers the federal deadlines.

Other ways to cut the tax on a New York sale

Besides an exchange, New York sellers mainly use timing and structure. An installment sale spreads the gain over the years you collect payments, which can keep more of it below the 9.65% bracket that starts at $2,155,350 of joint income. Selling in a year when your other income is low has a similar effect.

Moving out of New York before the sale does not avoid the tax on New York property. New York taxes nonresidents on gain from real property located in the state, which is why the IT-2663 payment exists. The capital gains tax calculator can estimate the federal side of any of these choices before you talk to your CPA.

Selling a New York apartment building to Skyline

Skyline buys apartment buildings with five or more units in New York, from Buffalo and Rochester to the Hudson Valley and Long Island. We buy directly, close on your timeline, and can work inside 1031 deadlines. If you are planning an exchange, we can set a closing date that gives you time to line up a replacement first, and we work with your intermediary on the paperwork.