1031 Exchange in New York: A Plain-English Investor Guide.

A 1031 exchange in New York follows the federal Section 1031 rules: 45 days to identify, 180 days to close, Qualified Intermediary required. What makes New York different is the combination of high state and city tax rates, the nonresident source-of-income rules that follow New York property even after a 1031, and the New York City and Yonkers real property transfer taxes that apply at closing.

Last updated: June 2026 · For New York-resident accredited investors

The federal rules in 60 seconds.

A 1031 exchange lets you sell investment real estate and reinvest the proceeds into like-kind replacement property while deferring federal capital gains tax. Two firm deadlines apply: Day 45 to identify replacement property in writing to your Qualified Intermediary, and Day 180 to close on it.

Your sale proceeds must go to the QI, not to you. Taking constructive receipt blows up the exchange. For the complete federal framework, see our 1031 Exchange Guide.

New York’s tax interaction with Federal 1031.

New York imposes a state personal income tax of up to 10.9% (top marginal rate). New York City adds up to another 3.876%, and Yonkers adds a surcharge. For a New York City investor in the top brackets, the combined state and city income tax rate on capital gains can exceed 14%. Deferring tax through a 1031 is especially valuable to New York investors.

New York conforms to federal Section 1031: the state respects the federal deferral. The complication is the source rule. New York taxes nonresidents on New York-source income, which includes gain from the sale of New York real property (NY Tax Law §631). When a New York resident 1031s out of New York property into out-of-state replacement, the deferred gain remains New York-source for state purposes. When the replacement property is eventually sold without further deferral, New York can tax that deferred New York-source gain on Form IT-203 (the nonresident return) even if the investor is no longer a New York resident.

Practical implication. New York City also imposes a Real Property Transfer Tax (RPTT) on transfers of NYC real property: 1% for residential transactions under $500,000, 1.425% above that, 1.425% for most commercial up to $500,000, and 2.625% for commercial above $500,000. The state also imposes a real estate transfer tax of $2 per $500 (0.4%) plus the “mansion tax” on residential transfers above $1 million (graduated 1–3.9%). These transfer taxes apply at closings and are not avoided by Section 1031, which defers income tax, not transfer tax.

Qualified Intermediary notes for New York investors.

New York does not impose a state-specific licensing regime for Qualified Intermediaries, but New York attorneys and title companies frequently coordinate the closing side of New York exchanges. Use a QI with proven New York transaction experience: the documentation and timing for New York City closings is more complex than most markets.

A QI without proven New York City experience should not handle a New York City exchange. The documentation, timing, and transfer tax filings are too unforgiving.

Common questions from New York investors.

Where New York investors find replacement property.

New York investors looking to diversify out of high-tax, low-yield New York markets often look to Texas, Florida, Tennessee, North Carolina, and Arizona: Sunbelt markets with no or low state income tax for the investor’s eventual residence (though the New York-source gain remains source-taxable in New York under §631 when recognized). DSTs holding institutional-grade Sunbelt property are common replacement vehicles.

Within New York, investors sometimes 1031 from rent-stabilized residential into commercial (industrial, medical office, net-leased retail) to escape regulatory complexity while staying in-state. Confirm with counsel that the contemplated exchange meets the like-kind test and that all transfer tax filings are coordinated.

For more on how DSTs work as 1031 replacement property, see our DSTs Explained guide. For evaluating the sponsor of any DST you consider, including the framework we apply to our own offerings, see our Sponsor Evaluation Framework.