# 1031 Exchange New York: State Tax, Form IT-2663 and Transfer Tax

> How a 1031 exchange works in New York: the 2026 state rates, Form IT-2663 for nonresident sellers, transfer and mansion taxes, and out-of-state swaps.

Source: https://baker1031.com/learn/1031-exchange-new-york


By Jerry Baker, Founder, Baker 1031 Investments. Updated October 28, 2026. Topic: 1031 Exchanges. Draft for review; not yet approved by Aurora Securities.

## The short answer

A 1031 exchange in New York lets you sell investment real estate and put off both federal and New York State income tax on the gain by buying like-kind real estate. That matters here because New York's top rate for 2026 is 10.9%, and nonresident sellers must hand in Form IT-2663 at the recording of the deed.

## Key takeaways

- New York starts its income tax with your federal adjusted gross income. So when a 1031 exchange defers gain on your federal return, New York generally defers it too.
- For 2026, New York's rates for joint filers run from 3.9% to 10.9%. New York City residents add a city tax of 3.078% to 3.876% for joint filers.
- A nonresident who sells New York property files Form IT-2663 at recording. A full 1031 exchange is a listed reason to owe no estimated payment, but any cash you take out is still taxed.
- An exchange defers income tax only. The state transfer tax, the 1% "mansion tax" on homes of $1 million or more, and the extra New York City taxes still apply to each deed.
- A New York rental owned through a partnership, LLC or small corporation can still count as New York property for a nonresident's tax.
- Moving exchange money out of New York, or into it from California, brings extra filings. Plan them before the sale closes.

## What does a 1031 exchange look like in New York?

Section 1031 of the Internal Revenue Code gives the **1031 exchange** its name. Under it, you can trade one property held for business or investment for another and leave the gain untaxed for now. Think of it as a pause on the tax bill, not a pardon.

The federal rules are the same in every state. A neutral third party, called a **qualified intermediary** or QI, has to receive the sale proceeds and keep them out of your hands until the purchase closes. Replacement property has to be identified in writing by day 45. The purchase has to close within 180 days or your tax return due date (with extensions) for the year of the sale, whichever comes first. Those federal mechanics get full treatment in my guide to [federal exchange requirements](/learn/1031-exchange-rules), so this page skips the repeat.

This page is about what New York adds on top. That comes down to four things:

1. **New York's income tax rates**, which are among the higher state rates and apply to gains the same way they apply to wages.
2. **New York's estimated tax at closing** for people who live outside the state, filed on Form IT-2663.
3. **New York's transfer taxes**, which a 1031 exchange does not touch.
4. **Cross-border moves**, where you sell in New York and buy elsewhere, or the reverse.

If you're comparing New York with other states, my hub page on [how each state treats a 1031 exchange](/learn/1031-exchange-by-state) puts them side by side.

## Does New York follow the federal exchange rules?

Yes, through the way New York defines income. Under [New York Tax Law § 612(a)](https://www.nysenate.gov/legislation/laws/TAX/612), "The New York adjusted gross income of a resident individual means his federal adjusted gross income," with the modifications listed in that section.

**Adjusted gross income**, or AGI, is your total income after certain adjustments. It's the number near the bottom of the first page of your federal Form 1040.

Here's why that matters. A gain that Section 1031 defers never lands in your federal AGI for the year of the sale. Because New York starts with federal AGI, the gain doesn't land in your New York income either. There's no separate New York election and no separate New York exchange form.

The flip side is just as automatic. Anything that's taxable on your federal return in the exchange year generally flows into your New York return as well. That includes:

- **Cash you keep.** If your QI releases money to you at the end, that cash generally gets taxed, to the extent you have gain to cover it.
- **Debt you don't replace.** If your old loan was bigger than the new one, and you didn't add cash to make up the gap, the difference is generally taxable.
- **Property that isn't like-kind.** Furniture, a car or a note thrown into the deal can be taxable too.

Tax people call these taxable pieces **boot**. My guide to [partial exchanges and boot](/learn/partial-1031-exchange-boot) walks through how each kind is measured. For this page, the point is simple. New York taxes whatever your federal return taxes, at New York's rates.

### What New York does not change

New York doesn't add its own deadlines. Both exchange deadlines come from federal law. New York doesn't require a separate intermediary or a separate identification letter. Your federal Form 8824, which [the IRS says](https://www.irs.gov/forms-pubs/about-form-8824) you use "to report each exchange of business or investment property for property of a like kind," is the main record of the exchange. Your New York return picks up the result through AGI.

## What tax rate does New York charge on a property gain?

New York has no special, lower rate for long-term capital gains. A gain on a rental building is taxed under the same rate schedule as wages and interest. That's different from the federal system, where long-term gains get their own lower rates.

The state publishes its 2026 rates in the [instructions for Form IT-2105](https://www.tax.ny.gov/pdf/current_forms/it/it2105i.pdf), its estimated tax form. Here is the 2026 schedule for married filing jointly (and qualifying surviving spouse). Other filing statuses have different bands.

| New York taxable income (joint) | 2026 rate on income in this band |
|---|---|
| $0 to $17,150 | 3.90% |
| $17,150 to $23,600 | 4.40% |
| $23,600 to $27,900 | 5.15% |
| $27,900 to $161,550 | 5.40% |
| $161,550 to $323,200 | 5.90% |
| $323,200 to $2,155,350 | 6.85% |
| $2,155,350 to $5,000,000 | 9.65% |
| $5,000,000 to $25,000,000 | 10.3% |
| Over $25,000,000 | 10.9% |

A large property sale can push you up several bands in a single year. A couple who usually lands in the 5.90% band could see much of a big gain taxed at 6.85% or 9.65%.

There's one more wrinkle. New York's income tax instructions send filers with New York AGI above $107,650 to a separate tax computation, according to the [2025 Form IT-201 instructions](https://www.tax.ny.gov/pdf/2025/inc/it201i_2025.pdf). So a bracket table gives you a rough idea, not the exact figure. Your CPA will run the real computation.

### New York City adds its own tax

If you live in New York City, you also owe a city resident income tax. It's figured on the same state return. For 2026, the IT-2105 instructions list these rates for married filing jointly (and qualifying surviving spouse).

| New York City taxable income (joint) | 2026 rate on income in this band |
|---|---|
| $0 to $21,600 | 3.078% |
| $21,600 to $45,000 | 3.762% |
| $45,000 to $90,000 | 3.819% |
| Over $90,000 | 3.876% |

Stack the city's top rate on top of the state's 6.85% band, and a city resident can face more than 10% in combined state and city tax on a large gain. That's before any federal tax. The New York State tax department's [2025 tax tables page](https://www.tax.ny.gov/pit/file/tax-tables/2025.htm) also points Yonkers residents to a separate Yonkers resident tax line on the return.

### Why the state share matters so much

Federal tax on a big real estate gain gets most of the attention. In New York, the state and city portion can be a large slice of the total bill. Deferring it means that money stays invested in your replacement property instead of going to Albany in April.

Deferring isn't the same as avoiding. If you later sell your replacement property for cash while you're a New York resident, New York generally taxes the gain at that time, under the rates then in effect.

## How does Form IT-2663 work for nonresident sellers?

New York collects tax up front when someone who lives outside the state sells New York real estate. The form is [Form IT-2663](https://www.tax.ny.gov/pdf/current_forms/it/it2663_fill_in.pdf), the Nonresident Real Property Estimated Income Tax Payment Form. The form says it's "For use on sale or transfer of real property by a nonresident of New York State."

### When you file it

You don't mail IT-2663 to Albany. The [2026 IT-2663 instructions](https://www.tax.ny.gov/pdf/current_forms/it/it2663i.pdf) tell you to "Submit your completed Form IT-2663 and full payment of estimated tax due, if any, to the recording officer." That happens when the deed is presented for recording, usually at closing. In practice, your closing attorney or title company handles the hand-off.

The 2026 instructions cover sales that occur "after December 31, 2025, but before January 1, 2027."

### What rate it uses

The estimated payment isn't based on your own bracket. The line 19 instruction on the form says "you must use the tax rate equal to the highest rate of tax for the tax year as set forth in the Tax Law § 601." The form then states: "For tax year 2026 that rate is 10.90% (0.1090)."

So a nonresident who sells for a $400,000 gain and isn't exchanging would generally hand over about $43,600 at recording. That's 10.9% times $400,000.

### How a 1031 exchange changes the form

Part 3 of the form lists exemptions from the estimated payment. Box 4B covers a seller who "is not required to recognize any gain or loss with respect to the transfer" under the Internal Revenue Code. The 2026 instructions speak to exchanges directly.

They say that if you "exchange real property for real property of a like kind and no gain or loss is recognized under IRC § 1031," you should "mark an X in box 4B, give a brief summary of the exchange, and indicate that the transaction is an IRC § 1031 like-kind exchange."

That means three things for your closing file:

- **Your QI agreement should be signed** before the deed is recorded. The box 4B summary describes a real exchange, not a plan to start one.
- **Your summary should be short and factual.** Name the property, the intermediary and the fact that the sale is the first leg of a Section 1031 exchange.
- **Your attorney should see the form** before closing day, so no one improvises at the recording desk.

### When you take some cash out

A partial exchange works differently. Box 4B doesn't fit a partial exchange, because some gain is recognized. Instead, line 18 of the form asks for "the gain (or portion of the gain) from line 17 that will be reported on your federal income tax return for 2026," and the estimated tax is figured on that amount.

If you plan to keep $150,000 of the sale cash, and your gain is larger than that, the taxable part is generally $150,000. At the 10.9% rate on the form, the estimated payment would be about $16,350. Your CPA should confirm the gain figure before closing, because the worksheet asks for it.

### This is a prepayment, not the final tax

IT-2663 is an estimate. Your real New York tax is figured on your nonresident return, Form IT-203, the [Nonresident and Part-Year Resident Income Tax Return](https://www.tax.ny.gov/pdf/current_forms/it/it203_fill_in.pdf). The IT-2663 instructions tell nonresidents to "take into account the amount of estimated tax paid with Form IT-2663" when they file, and say any refund can be claimed at that time.

If your actual New York tax on the sale is lower than 10.9% of the gain, you get the difference back when you file. If your exchange fails after you checked box 4B, you'll owe the tax on that return instead, plus any interest or penalty your CPA identifies.

## When does New York count your property as "New York property"?

A nonresident pays New York tax only on New York-source income. Gain from New York real estate is the clearest example. Under [Tax Law § 631(b)(1)(A)](https://www.nysenate.gov/legislation/laws/TAX/631), New York-source income includes income from "the ownership of any interest in real or tangible personal property in this state."

The same section reaches through some entities. It says "real property located in this state" includes "an interest in a partnership, limited liability corporation, S corporation, or non-publicly traded C corporation with one hundred or fewer shareholders" that owns New York real property. The statute sets further conditions on when this applies, so have your CPA check your entity against the full text.

In plain terms, owning a Brooklyn rental through an LLC doesn't automatically take the gain outside New York's reach. If you live in New Jersey or Florida and sell your LLC interest, rather than having the LLC sell the building, ask your CPA whether that sale counts as New York-source gain.

## Which transfer taxes still apply in a New York exchange?

This is where New York differs most from many states. A 1031 exchange defers income tax. New York's real estate transfer tax is a separate tax on the deed itself. The state tax department's [real estate transfer tax page](https://www.tax.ny.gov/bus/transfer/rptidx.htm) does not list a like-kind exchange as a reason to skip it. Budget for transfer taxes on both the sale and the purchase.

### The statewide transfer tax

The state rate is "two dollars for each $500, or fractional part thereof, of consideration." That works out to 0.4% of the price. The seller, called the grantor, pays it. On a $2,000,000 sale, that's $8,000.

Outside New York City, you file Form TP-584 with the county clerk where the property sits. The form and tax are due "no later than the 15th day after the delivery of the deed." New York City deals use Form TP-584-NYC.

### The "mansion tax" on residential property

New York adds a tax of 1% of the price on residential property when the consideration is $1 million or more. The buyer pays it.

This matters to investors more than the nickname suggests. The tax department's [memo on the 2019 changes](https://www.tax.ny.gov/pdf/memos/real_estate/m19-1r.pdf) says residential real property "includes any premises that is or may be used in whole or in part as a personal residence." It lists one-, two- and three-family houses, condominium units and co-op units. So if your replacement property is a $1.2 million two-family rental, you may owe about $12,000 as the buyer.

### New York City's extra taxes

Inside New York City, two more layers can apply.

- **Additional base tax.** An extra $1.25 for each $500 of price applies to residential property sold for $3 million or more, and to other property sold for $2 million or more. Combined with the state's $2, that's $3.25 per $500, or 0.65%.
- **Supplemental tax.** Residential property sold for $2 million or more also owes a supplemental tax, paid by the buyer, on a sliding scale.

| Price of a NYC residential conveyance | Supplemental tax rate |
|---|---|
| $2 million to under $3 million | 0.25% |
| $3 million to under $5 million | 0.5% |
| $5 million to under $10 million | 1.25% |
| $10 million to under $15 million | 2.25% |
| $15 million to under $20 million | 2.5% |
| $20 million to under $25 million | 2.75% |
| $25 million or more | 2.9% |

The tax department's memo also notes that for the supplemental tax, mixed-use property is taxed only on the residential part. New York City also charges its own real property transfer tax, which is a city tax with its own forms. Your closing attorney will price it.

### Why transfer taxes shape an exchange

Full deferral generally means a replacement priced at or above your net sale price, with every dollar of exchange cash reinvested. Transfer taxes reduce what's left. If you're buying a New York replacement, budget for the buyer-side taxes from day one. Ask your CPA and QI which closing costs can be paid from exchange funds without creating taxable cash.

## Selling in New York and buying somewhere else

Many New York owners sell in the state and buy their replacement property elsewhere. Section 1031 allows that. Under [26 U.S.C. § 1031(h)](https://www.law.cornell.edu/uscode/text/26/1031), the only location limit is that "Real property located in the United States and real property located outside the United States" are not like-kind. Any U.S. state works.

### If you stay a New York resident

New York taxes residents on their income from everywhere, because it starts with your federal AGI. So if you exchange a Queens rental for a warehouse in Ohio, nothing changes on the New York side in the exchange year. When you later sell the Ohio warehouse for cash, the deferred gain becomes taxable. If you're still a New York resident then, New York generally taxes it.

You may also owe tax to the state where the new property sits, both on yearly rent and on the later sale. Ask your CPA whether New York lets you offset that other state's tax against what you owe New York.

### If you plan to move out of New York

The answer depends on your facts. New York has a statute titled ["Accruals upon change of residence"](https://www.nysenate.gov/legislation/laws/TAX/639), Tax Law § 639. It says a person who becomes a nonresident must, "regardless of his method of accounting, accrue to the period of residence any items of income" that accrued before the move. Before you move, ask your CPA how New York would treat deferred gain from an exchange you made while you lived here, and how the timing of the move and the later sale fit together. Don't assume that moving resets everything.

### If you already live elsewhere

As a nonresident, you deal with New York at the sale through IT-2663 and your IT-203 return. After a full exchange into property in another state, the deferred gain sits in your out-of-state replacement property. Ask your CPA how New York views that gain when you eventually sell, since the original gain came from New York real estate.

## Buying New York property with exchange money from another state

The reverse move brings its own rules.

### Coming from California

California follows gain that leaves the state. Its [Form FTB 3840 instructions](https://www.ftb.ca.gov/forms/2025/2025-3840-instructions.html) reach "All taxpayers who conduct an IRC Section 1031 exchange, regardless of residence status or commercial domicile," who swap California real property for like-kind property outside California. It's filed "for each subsequent taxable year, generally until the California sourced deferred gain or loss is recognized."

That means a Californian who exchanges into a Manhattan condo or a Long Island retail building files with California every year until the gain is taxed. My [California 1031 exchange guide](/learn/1031-exchange-california) covers that filing in detail.

### Coming from any state

Once you own New York rental property, the rent is New York-source income under § 631. That generally means filing a New York nonresident return each year you have New York income, even if you live elsewhere. When you sell, IT-2663 applies at recording. As a buyer, you also pay any mansion tax or New York City supplemental tax that applies.

## How to do a 1031 exchange in New York, step by step

This sequence folds New York's forms and taxes into the federal process.

### Step 1: Run the state numbers before you list

Ask your CPA for two estimates: the tax on a straight sale, and the tax on an exchange. Include New York State tax, any New York City or Yonkers tax, and the federal tax. Seeing the state share in dollars often decides the question. My [1031 tax deferral calculator](/tools/1031-tax-deferral-calculator) gives a rough first look.

### Step 2: Hire a qualified intermediary

The QI must be in place before closing, because sale money that reaches you, however briefly, can sink the exchange. My guide to [choosing a qualified intermediary](/learn/qualified-intermediary) lists the questions to ask.

### Step 3: Tell your closing team it's an exchange

Whoever runs your closing, whether an attorney or a title company, needs to know early. Ask them to add exchange language to the contract, to coordinate with the QI, and to prepare the state forms. Those include TP-584 for transfer tax, and IT-2663 if you're a nonresident.

### Step 4: Budget for transfer taxes on both sides

Price the 0.4% state transfer tax on your sale. If you're buying in New York, price the mansion tax and any New York City taxes on the purchase. Fold those costs into how much replacement property you need to buy.

### Step 5: Close the sale and send the money to the QI

Proceeds go straight from the closing to the intermediary. If you're a nonresident doing a full exchange, IT-2663 goes in with the deed with box 4B marked. If you're keeping some cash, box 4B doesn't apply; the form goes in with the estimated payment on the taxable portion instead.

### Step 6: Name your replacement property by day 45

Put it in writing, signed, and delivered to the QI or another party allowed by the rules. Name backups. Deals fall through, and a backup you didn't name in time can't be added later.

### Step 7: Close on the replacement in time

You must close within 180 days or your tax return due date (with extensions) for the year of the sale, whichever comes first. For a late-year sale, file a federal extension, since your return due date could otherwise cut the window short. The IRS says [Form 4868](https://www.irs.gov/forms-pubs/about-form-4868) is used "to apply for six (6) more months to file Form 1040."

### Step 8: Report it on both returns

Your CPA reports the exchange on federal Form 8824. Your New York return then reflects the result through federal AGI. Nonresidents file IT-203 and claim credit for any IT-2663 payment.

### Step 9: Keep the file

Keep the QI agreement, closing statements, identification letter, TP-584 and IT-2663 copies. If New York ever asks about the sale, these documents tell the story.

## A worked example: one gain, three New York sellers

Every figure below is hypothetical and rounded for easy math, and none of it describes a real person, property or offering. It uses a simple bracket estimate, ignores New York's separate tax computation for higher incomes, and leaves out federal tax. It isn't tax advice.

### The sale

Say a rental two-family house in the Hudson Valley sells for $1,800,000. Selling costs are $100,000. The owners' adjusted basis is $700,000. **Adjusted basis** is the tax cost of the property after years of depreciation. The gain is $1,800,000 − $100,000 − $700,000 = **$1,000,000**.

Assume the sellers are a married couple with $400,000 of other New York taxable income. That puts all of the extra gain inside the 6.85% band, which runs up to $2,155,350.

### Seller A: lives in the Hudson Valley, sells without an exchange

- New York State tax on the gain: $1,000,000 × 6.85% = **about $68,500**
- State transfer tax as the seller: $1,800,000 × 0.4% = $7,200

### Seller B: same sale, but lives in Manhattan

- State tax, as above: about $68,500
- City tax at the top joint rate: $1,000,000 × 3.876% = **about $38,760**
- Combined state and city: **about $107,260**
- Transfer tax: the same $7,200, since the property is outside the city

### Seller C: lives in Florida

- Estimated payment at recording on IT-2663: $1,000,000 × 10.9% = **about $109,000**
- Final New York tax: figured later on IT-203. If it's less than $109,000, the difference comes back as a refund.

### Now add a full exchange

If each seller completes a full 1031 exchange, the federal gain is deferred. So the New York gain is deferred too.

| Seller | State or city income tax due now, no exchange | With a full 1031 exchange | Transfer tax on the sale |
|---|---|---|---|
| A, Hudson Valley resident | About $68,500 | $0 now | $7,200 either way |
| B, Manhattan resident | About $107,260 | $0 now | $7,200 either way |
| C, Florida resident | About $109,000 paid at recording | $0 estimated; box 4B checked | $7,200 either way |

Notice the last column. The exchange doesn't move it.

### A partial version

Say Seller C keeps $150,000 of cash and exchanges the rest. Assume the replacement property and new loan are large enough that the only taxable piece is that $150,000. The IT-2663 estimated payment is about $16,350, which is 10.9% of $150,000. The other $850,000 of gain stays deferred.

## New York resident, city resident and nonresident compared

The same exchange touches New York differently depending on where you live. Here's a summary.

| Question | NY State resident | NYC resident | Nonresident selling NY property |
|---|---|---|---|
| Does a full 1031 defer NY income tax? | Yes, through federal AGI | Yes, state and city | Yes |
| Rate if gain is taxable (2026) | 3.9% to 10.9% by band | State rate plus 3.078% to 3.876% | Your bracket, but 10.9% estimate at recording |
| Form at closing | TP-584 (TP-584-NYC if the property is in NYC) | TP-584 (TP-584-NYC if the property is in NYC) | TP-584 (TP-584-NYC if the property is in NYC), plus IT-2663 |
| Return for the year | Resident return | Resident return with city tax | IT-203 |
| Transfer tax | Yes; NYC layers apply if the property is in NYC | Yes; NYC layers apply if the property is in NYC | Yes; NYC layers apply if the property is in NYC |
| Tax on a later cash sale | NY taxes it if still a resident | Same, plus city tax | Ask your CPA how NY treats the gain |

## Can a DST be the replacement property for a New York sale?

It can. In a **Delaware Statutory Trust**, or DST, the trust owns one or more commercial buildings, while many investors each hold a beneficial interest in that trust. Under [IRS Revenue Ruling 2004-86](https://www.irs.gov/pub/irs-drop/rr-04-86.pdf), "A taxpayer may exchange real property for an interest in the Delaware statutory trust." Because of that holding, a beneficial interest in a DST can qualify as the replacement in a New York exchange, provided every other exchange requirement is satisfied. My [DST guide](/learn/dst-guide) explains how the structure works.

### Why some New York sellers look at DSTs

- **They're tired of managing.** A sponsor, the company that puts the deal together, runs the property. You don't fix boilers or chase rent.
- **They want to buy outside New York.** A DST lets you own a slice of property in another state without flying out to inspect it yourself.
- **They need to place an exact amount.** If you sold for an odd figure, a DST interest can absorb the leftover cash so it doesn't become taxable.
- **They're racing the 45-day clock.** DST properties are already bought, so the closing timeline can be shorter than a typical purchase.

### The trade-offs are real

- **DSTs are illiquid.** You generally can't sell your interest until the property sells. The SEC's [investor bulletin on private placements](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/private) says "you should be prepared to hold the securities indefinitely."
- **You give up control.** You don't vote on leasing, financing or when to sell.
- **Distributions are not guaranteed.** A sponsor can lower or suspend them.
- **You can lose money.** You can lose some or all of your investment. My guide to [the main DST risks](/learn/dst-risks) covers them one by one.
- **Most DSTs are for accredited investors only.** Under the SEC's [accredited investor rules](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-3), there are three common routes. One is income: over $200,000 in both of the two prior years ($300,000 for a couple, counting a spouse or spousal equivalent), for someone who "reasonably expects the same for the current year." A second is a net worth above $1 million, with the value of your main home excluded. The third is a Series 7, 65 or 82 license held in good standing.

### The state-tax angle for New Yorkers

Revenue Ruling 2004-86 treats DST owners as each holding "an undivided fractional interest" in the property for federal tax. Because of that, a DST that owns buildings in another state can mean filing a nonresident return there for your share of the income. A New York resident still reports everything to New York. Ask your CPA about the filings before you pick a DST in a state with an income tax.

Before founding Baker 1031 Investments, I worked in real estate acquisitions and management, and [my background](/about) is on my firm's site. My team and I offer DSTs from more than 20 institutional sponsors. When we go through options together, I lay out the case for each one, the parts I find appealing and the concerns I still have. You can see [the offerings I currently have available](/invest). Securities are offered through Aurora Securities, Inc., member FINRA/SIPC. My firm doesn't prepare tax returns or give tax or legal advice, so your CPA and attorney stay central.

## Questions to bring to your New York CPA and attorney

A short meeting before you list can save a lot of scrambling later. Here are the questions I'd want answered, grouped by who usually answers them.

### For your CPA

- **What's my New York tax on a straight sale?** Ask for the state figure and, if you live in the city, the city figure, using New York's full tax computation rather than a bracket table.
- **How much of my gain is depreciation?** Federal tax treats that part differently, as I explain in my guide to [depreciation recapture](/learn/depreciation-recapture), and it changes how much an exchange is worth to you.
- **Will I have any taxable cash or debt relief?** If so, how much New York tax will that create, and when is it due?
- **What happens if I move?** Ask how § 639 would apply to you, and whether timing the move differently changes anything.
- **Which states will I file in after the exchange?** A replacement in another income tax state, or a DST holding property there, can add a return each year.

### For your attorney or closing team

- **Who prepares TP-584 and, if needed, IT-2663?** Make sure one person owns each form.
- **Is the replacement property "residential" for transfer tax?** That decides whether the mansion tax or New York City's supplemental tax applies.
- **Does the contract allow an assignment to my intermediary?** Most exchange contracts include a short clause that lets the QI step in.
- **Is my ownership the same on both sides?** The same taxpayer that sells generally has to buy. Changing from an LLC to your own name, or the reverse, can break the exchange.

### For your qualified intermediary

- **When do you need the signed exchange agreement?** It must be in place before the deed is recorded.
- **How do I send my identification letter?** Get the exact delivery method in writing.
- **Can transfer taxes and other closing costs be paid from exchange funds?** Some costs can be paid from the account without creating taxable cash. Others can't.

The answers won't all be simple. Getting them before closing day turns surprises into decisions you made on purpose.

## Mistakes to avoid in a New York exchange

1. **Checking box 4B without a real exchange in place.** The box describes a Section 1031 transfer. If the QI agreement isn't signed before closing, the box doesn't fit the facts.
2. **Forgetting the 10.9% estimate on cash you keep.** A nonresident who takes some cash still pays the estimated tax on that portion at recording.
3. **Treating transfer tax as deferred.** It isn't. Budget the 0.4% state tax on the sale, and any mansion or city tax on the purchase.
4. **Missing that a rental can be "residential."** A two- or three-family rental, condo or co-op can trigger the 1% mansion tax at $1 million or more.
5. **Assuming an LLC wrapper takes you outside New York.** Section 631 can treat an interest in a small entity that owns New York property as New York property.
6. **Moving out of state without a plan.** Talk with your CPA before you change residence, not after you sell the replacement.
7. **Ignoring the city tax in the math.** A Manhattan or Brooklyn resident's real deferral includes the city tax, which can run close to 4% of the gain on top of the state tax.
8. **Selling late in the year without an extension.** Your return due date can cut the 180 days short. File the federal extension.
9. **Picking out-of-state property without checking that state's tax.** A replacement in another income tax state can add a nonresident return each year.
10. **Leaving your closing team out of the loop.** The person preparing the deed forms needs to know the sale is an exchange before closing day.

## What my data shows

A New York seller who picks a DST may end up owning property in another state, so location is the number I'd look at first. Here is what [my offering records](/data/dst-offerings) as of October 2026 show. The records cover 76 DST offerings from 38 sponsors. These counts describe the offerings I follow and shouldn't be read as a prediction for any later offering.

**Locations span 33 states; the most common are Florida (14), Texas (13), North Carolina (8), Georgia (7).**

For a New Yorker, that spread matters for taxes. Some states tax a nonresident's share of rental income and gain, and some have no personal income tax at all. Check the location of every property in a DST before you commit, and ask your CPA what it means for your filings.

### Minimums help with odd-sized proceeds

My offering records as of October 2026 show a median minimum investment of $100,000. Minimums range from $25,000 to $500,000, and 21 offerings (28%) start at $25,000. A small minimum gives a New York seller somewhere to put the last bit of exchange cash after the main purchase, so less of it ends up taxed.

### Leverage affects the debt you must replace

In my offering records as of October 2026, 36 of 76 offerings (47%) are all-cash, with no debt. Another 16 (21%) have loan-to-value above 50%. The median loan-to-value among leveraged offerings is about 49%. **Loan-to-value**, or LTV, expresses the loan amount as a share of what the property is worth.

If your New York property had a mortgage, you generally need to replace that debt or add cash to defer all the gain. A leveraged DST can help with that. An all-cash DST won't help replace debt, but it has no lender who can force a sale.

## Frequently asked questions

### Does New York recognize 1031 exchanges?

Yes. New York starts its income tax with your federal adjusted gross income, so gain deferred under Section 1031 is generally deferred for New York too. There's no separate New York exchange form.

### What is New York's capital gains tax rate for 2026?

New York has no separate capital gains rate, so gains are taxed under the regular schedule. For 2026, the rates for joint filers run from 3.9% to 10.9%. New York City residents add a city tax of 3.078% to 3.876%.

### Do I have to file Form IT-2663 if I'm doing a 1031 exchange?

If you're a nonresident selling New York real property, you file IT-2663 at recording either way. In a full exchange, you mark box 4B and summarize the exchange, so no estimated payment is due. If you keep some cash, you pay estimated tax on that portion.

### What rate does New York withhold when a nonresident sells property?

The IT-2663 estimated payment uses the highest New York rate for the year. For 2026, the form says that rate is 10.90%. It's a prepayment, and your actual tax is settled on Form IT-203.

### Does a 1031 exchange avoid the New York mansion tax?

No. The mansion tax is a tax on the deed, not on income, so an exchange doesn't change it. If your replacement is residential property bought for $1 million or more, the buyer generally owes 1% of the price.

### Can I sell property in New York and buy in Florida with a 1031 exchange?

Yes. Section 1031 treats any real property in the United States as like-kind to other U.S. real property. If you stay a New York resident, New York generally taxes the gain when you later sell the Florida property for cash.

### Do I still owe New York tax if I move to another state after my exchange?

It depends on your facts and on New York's rules for people who change residence. Talk with your CPA before you move, not after you sell. Don't assume the move erases New York's claim to tax.

### Can a New York investor exchange into a DST?

Under IRS Revenue Ruling 2004-86, a beneficial interest in a DST can qualify as replacement property when every other requirement is met. Most DSTs are sold only to accredited investors. They're hard to sell, their distributions are not guaranteed, and the value can fall below what you paid.

### Who pays the New York transfer tax in a 1031 exchange?

The seller generally pays the state transfer tax of $2 per $500 of price. The buyer generally pays the mansion tax and New York City's supplemental tax. The exchange doesn't shift or defer any of them.

### Does owning my New York rental through an LLC change the state tax?

Not necessarily. New York Tax Law § 631 can treat an interest in a partnership, LLC or small corporation that owns New York real property as New York property. Have your CPA review your entity before you sell.

## Before you act

I wrote this page to explain how New York treats an exchange; it isn't tax, legal or investment advice. New York revises its forms and rates, so walk through each step with a CPA, a real estate attorney and your QI before the property goes on the market. A DST is sold solely through a private placement memorandum to investors who qualify, and the whole amount invested can be lost.

## Sources

- [26 U.S.C. § 1031, Exchange of real property held for productive use or investment (Cornell LII)](https://www.law.cornell.edu/uscode/text/26/1031)
- [New York Tax Law § 612, New York adjusted gross income of a resident individual](https://www.nysenate.gov/legislation/laws/TAX/612)
- [New York Tax Law § 631, New York source income of a nonresident individual](https://www.nysenate.gov/legislation/laws/TAX/631)
- [NYS Department of Taxation and Finance, Instructions for Form IT-2105 (2026)](https://www.tax.ny.gov/pdf/current_forms/it/it2105i.pdf)
- [NYS Department of Taxation and Finance, Instructions for Form IT-201 (2025)](https://www.tax.ny.gov/pdf/2025/inc/it201i_2025.pdf)
- [NYS Department of Taxation and Finance, 2025 tax tables](https://www.tax.ny.gov/pit/file/tax-tables/2025.htm)
- [NYS Department of Taxation and Finance, Form IT-2663 (2026)](https://www.tax.ny.gov/pdf/current_forms/it/it2663_fill_in.pdf)
- [NYS Department of Taxation and Finance, Instructions for Form IT-2663 (2026)](https://www.tax.ny.gov/pdf/current_forms/it/it2663i.pdf)
- [NYS Department of Taxation and Finance, Form IT-203](https://www.tax.ny.gov/pdf/current_forms/it/it203_fill_in.pdf)
- [NYS Department of Taxation and Finance, Real estate transfer tax](https://www.tax.ny.gov/bus/transfer/rptidx.htm)
- [NYS Department of Taxation and Finance, TSB-M-19(1)R, real estate transfer tax changes](https://www.tax.ny.gov/pdf/memos/real_estate/m19-1r.pdf)
- [California Franchise Tax Board, 2025 Instructions for Form FTB 3840](https://www.ftb.ca.gov/forms/2025/2025-3840-instructions.html)
- [New York Tax Law § 639, Accruals upon change of residence](https://www.nysenate.gov/legislation/laws/TAX/639)
- [IRS Revenue Ruling 2004-86](https://www.irs.gov/pub/irs-drop/rr-04-86.pdf)
- [IRS, About Form 8824, Like-Kind Exchanges](https://www.irs.gov/forms-pubs/about-form-8824)
- [IRS, About Form 4868](https://www.irs.gov/forms-pubs/about-form-4868)
- [Investor.gov, Updated Investor Bulletin: Accredited Investors](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-3)
- [Investor.gov, Private Placements under Regulation D](https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/private)

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Securities are offered through Aurora Securities, Inc., member FINRA/SIPC. Baker 1031 Investments, LLC is independent of Aurora Securities, Inc. and is not a registered broker-dealer or investment adviser. This content is general education, not investment, tax, or legal advice, and is not an offer to buy or sell securities. Offers are made only through the offering documents to eligible investors, generally accredited investors. DST interests are illiquid, distributions are not guaranteed, and you can lose your entire investment.

Contact: Jerry Baker, Baker 1031 Investments · hello@baker1031.com · (415) 965-0552 · https://baker1031.com/contact