Selling a multifamily in White Plains can unlock serious capital, but taxes can take a big bite if you wait until contract to plan. You want a clean closing, predictable cash at settlement, and smart options for reinvestment. In this guide, you’ll learn how your sale is taxed, which strategies can reduce or defer the bill, and the local steps that keep your closing on track. Let’s dive in.
Understand your tax picture first
Federal: capital gains and recapture
When you sell, your profit is split between long-term capital gain and depreciation recapture. The recapture portion tied to building depreciation is taxed up to 25% under unrecaptured Section 1250 rules. Long-term capital gains follow the 0, 15, or 20% brackets, and high earners may owe the 3.8% Net Investment Income Tax. See the mechanics in IRS Publication 544 on sales and recapture.
New York State income tax
New York taxes capital gains as ordinary income at state personal income tax rates. For higher incomes, top brackets reach into high single digits to low double digits. Review recent changes to New York’s personal income tax brackets as you model your net proceeds.
Transfer taxes and mansion tax at closing
New York State’s real estate transfer tax is commonly 0.4% of the sale price, typically paid by the seller when the deed is recorded. On residential purchases at or above $1,000,000, the buyer usually pays a 1% mansion tax. Budget for these closing costs alongside title and recording fees.
Nonresident and foreign seller withholding
If you are not a New York resident, the state generally requires an estimated tax payment at closing via Form IT-2663. Without it, recording can be delayed. Check the Form IT-2663 instructions for nonresident estimated tax.
If a seller is a foreign person, the buyer may need to withhold under FIRPTA, often 15% of the amount realized, unless a reduced withholding certificate is approved. Understand the process and timing in the FIRPTA withholding rules.
Proven ways to reduce or defer taxes
1031 like-kind exchange
A 1031 exchange lets you defer gain by swapping into other investment real estate. You must identify replacement property within 45 days and close within 180 days, and a qualified intermediary must hold proceeds. Review deadlines and reporting in the Instructions for Form 8824.
- Best for: Staying invested and leveraging full proceeds into new property.
- Watchouts: Strict timing, boot triggers tax, and state withholding rules still apply.
Qualified Opportunity Funds (QOFs)
You can reinvest capital gains into a certified QOF within 180 days to defer recognition of the original gain. A long hold may also allow exclusion of appreciation inside the fund. Get familiar with the framework in this Qualified Opportunity Funds overview.
- Best for: Sellers who want cash from the sale without a 1031 timeline and are comfortable with a fund investment.
- Watchouts: Rules and windows have evolved over time. Confirm current law before you invest.
Installment sale (seller financing)
You can spread recognition of gain by receiving payments over time and reporting using the installment method. Some depreciation recapture may still be recognized in the year of sale. See how it works in the installment method and Form 6252.
- Best for: Managing cash flow and taxable income over several years.
- Watchouts: Buyer credit risk and interest income taxation.
Cost segregation and timing
Cost segregation can accelerate depreciation before a sale, improving near-term cash flow. The tradeoff is higher recapture when you sell, which you may still choose to defer via 1031. The IRS highlights documentation and exam focus in its audit guide on cost segregation.
- Best for: Owners with recent acquisitions or large improvements and a multi-year hold plan.
- Watchouts: Quality of the study and recordkeeping matter.
Deal structure choices
Selling entity interests instead of assets, or making partnership elections, can change tax character and timing. Buyers often prefer asset deals for basis step-up, while sellers may prefer interest sales for different reasons. Model scenarios with your tax advisor before you lock terms.
White Plains closing details that affect taxes
- Recording happens with the Westchester County Clerk in White Plains. Expect state transfer tax filings when you record the deed. See local context for recording in Westchester here: Westchester County recording practices.
- White Plains does not add a separate city transfer tax like some nearby municipalities. Always confirm the specific municipality before closing.
- For nonresident sellers, prepare IT-2663 early to avoid delays. For foreign sellers, confirm FIRPTA withholding and any certificate process.
- Property classification matters for depreciation history. Residential rental buildings are typically depreciated over 27.5 years, while nonresidential components use 39 years. That affects recapture on sale.
Pre-sale checklist and timeline
6 to 12 months before listing
- Assemble basis and depreciation records, including improvements and prior studies.
- Decide if a 1031 or QOF fits your goals, since both have tight timelines. Review the Form 8824 rules for 1031 timing.
- Confirm your residency status and ownership structure. If you are a nonresident, plan for IT-2663 requirements.
At contract and pre-closing
- If exchanging, line up a qualified intermediary so proceeds never touch your account.
- Coordinate any nonresident or FIRPTA withholding to keep recording on schedule.
- With counsel, evaluate asset vs interest sale options and any partnership elections that affect tax character.
At closing
- Budget for state transfer tax, mansion tax if applicable, title, and recording fees.
- Confirm who pays which costs per the contract and that all withholding certificates or forms are complete.
Post-closing
- File federal and state forms that match your strategy and deal structure. That may include Form 4797, Schedule D, Form 8824 for a 1031, Form 6252 for installment sales, or QOF reporting.
The bottom line
Smart planning lets you control taxes, cash at closing, and the pace of your next investment. If you prepare your records, choose the right strategy, and align the closing steps with your plan, you can sell with confidence and redeploy capital on your schedule. When you are ready to explore timing, pricing, and buyer demand for your White Plains multifamily, connect with Exodus Capital for a discreet, process-driven sale.
FAQs
How are federal taxes calculated on a multifamily sale?
- Your profit is split between long-term capital gains and depreciation recapture, with rules outlined in IRS Publication 544.
How does New York tax a property gain for residents and nonresidents?
- New York treats capital gains as ordinary income at state personal rates and requires nonresidents with NY-source gains to handle estimated tax at closing using Form IT-2663 instructions.
Can a 1031 exchange work for a White Plains multifamily sale?
- Yes, if you follow 45-day identification and 180-day closing deadlines using a qualified intermediary as explained in the Instructions for Form 8824.
What if I want to take cash but still defer some taxes?
- A Qualified Opportunity Fund can defer capital gains if you invest within 180 days, as outlined in this QOF overview.
Do I always owe withholding if I am a foreign seller?
- FIRPTA often requires buyer withholding, generally 15%, unless you obtain a reduced withholding certificate. See the FIRPTA rules.
Will cost segregation just increase my tax at sale?
- It accelerates depreciation, which can raise later recapture, but it often still improves after-tax cash flow; the IRS cost segregation audit guide highlights documentation and exam focus.
