A seemingly-good New York real estate deal can have unexpected financial ramifications if you don't know which tax rules and codes apply to your transaction and which can be used to your benefit. Like all tax laws, the laws pertaining to the purchase and sale of residential and commercial real estate are constantly changing. That's why it's essential to have a team of legal, financial and tax professionals advising you so that you can take advantage of the tax laws that work in your favor and avoid costly mistakes and legal penalties.
For example, condominium and co-op developers in New York City that structured as an LLC or partnership are required to pay a city unincorporated business tax. Many don't realize this, and can end up being saddled with an unexpected tax penalty.
You may be able to delay paying some taxes on the return you get on your sale of a property or land Section 1031 of the Internal Revenue Code covers the details on that.
If you're selling a rental property, you may also be able to defer taxes if you sell it in installments. You may be able to avoid paying taxes until you've received all of the funds for the buyer.
Depreciation is a big factor in taxes, of course. Tax law has changed so that building owners can be eligible to write off bonus depreciation on improvements by tenants.
Don't wait until tax time rolls around to start thinking about these things. Before you sign any purchase or sale agreements, it's essential to discuss these and other tax ramifications with your New York real estate attorney and your tax professional.
Source: Bisnow, "5 Tax Tips You Need to Consider Before Your Next Deal," Anchin Block & Anchin, Sep. 29, 2016