A married couple who bought a co-op for $600,000 and sells it at $1,400,000 looks at an $800,000 spread and assumes that is the taxed number. It is not. After the costs of selling come off the price, the money they put into the apartment goes onto their basis, and the federal $500,000 exclusion for a jointly filed primary residence comes off the remainder, the gain the IRS actually taxes in that example lands near $110,000.
The gap between those two numbers is where most seller anxiety lives, and it is arithmetic rather than strategy. This guide walks the calculation in the order the forms walk it, then covers what New York State and New York City add on top, what changes when the apartment is a second home rather than where you live, and what changes again when you inherited it.
Your sale price is not your gain
Two adjustments sit between the contract price and the taxable gain, and both work in your favor.
Selling costs reduce what you are treated as receiving. New York State's own worksheet for real property sales states the line plainly: "Sale price less selling expenses." Broker commission, the NYC Real Property Transfer Tax, the New York State transfer tax, your attorney, and a co-op flip tax are all costs of the sale. A seller at $1.4 million with a 6% commission, a 2% flip tax, and the two transfer taxes is subtracting roughly $140,000 before the gain calculation even starts. Our seller net proceeds calculator prices that whole stack, and the NYC transfer tax calculator isolates the two government pieces.
Basis is more than what you paid. The same state worksheet builds cost basis as purchase price, plus improvements, plus closing costs, minus depreciation where it applies. Federal Publication 523 works the same way for a home sale. So your basis includes the buyer-side closing costs you paid years ago and every capital improvement since: the kitchen, the bathroom, the HVAC, the windows, the built-ins, the assessment the building levied for a new roof. Painting and routine repairs do not count. Improvements do.
The receipts are worth real money
Every documented improvement raises your basis and lowers your taxable gain by the same dollar. A $60,000 renovation you can prove is $60,000 of gain you never report. A $60,000 renovation you cannot prove is worth nothing on the return. Keep contractor invoices, cancelled checks, permits, and the closing statement from the day you bought, and hand the whole file to your accountant in the year you sell.
The federal exclusion, and who actually qualifies
Internal Revenue Code Section 121 lets you exclude up to $250,000 of gain on the sale of your main home, or up to $500,000 on a joint return. The IRS states three conditions in Topic 701:
- Ownership test. You owned the home for at least 24 months out of the 5 years ending on the sale date.
- Use test. You lived in it as a residence for at least 24 months of those same 5 years. The two periods do not have to be the same 24 months, but both have to fall inside the 5-year window.
- Once every two years. Generally you cannot take the exclusion if you already excluded gain from another home sale in the two years before this one.
On a joint return the tests split: either spouse can satisfy the ownership test, but both spouses have to satisfy the use test individually to reach the full $500,000. That distinction decides real cases in New York, where one spouse often owns the apartment outright from before the marriage. Publication 523 carries the partial-exclusion exceptions for a job change, a health reason, or other unforeseeable circumstances, which is the paragraph to read if you are selling short of the 24 months.
Three worked examples
Illustrations with round numbers, not quotes. Selling costs here assume a 6% commission, the NYC and New York State transfer taxes, attorney fees, and a 2% flip tax on the co-op.
| Line | Single filer, condo | Married couple, co-op | Second home, married |
|---|---|---|---|
| Sale price | $900,000 | $1,400,000 | $1,600,000 |
| Selling costs | $73,000 | $140,000 | $128,000 |
| Amount realized | $827,000 | $1,260,000 | $1,472,000 |
| Purchase price | $450,000 | $600,000 | $800,000 |
| Purchase closing costs | $12,000 | $10,000 | $15,000 |
| Documented improvements | $25,000 | $40,000 | $0 |
| Adjusted basis | $487,000 | $650,000 | $815,000 |
| Gain | $340,000 | $610,000 | $657,000 |
| Section 121 exclusion | $250,000 | $500,000 | none |
| Taxable gain | $90,000 | $110,000 | $657,000 |
Read the third column next to the second. Same neighborhood, same kind of building, a bigger sale price, and roughly six times the taxable gain, because the exclusion only attaches to a home you actually lived in. That single line is the difference between a sale you plan around and a sale that surprises you.
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What New York State and New York City add
New York does not run a separate capital gains schedule the way the federal return does. Your New York adjusted gross income starts from your federal adjusted gross income, adjusted by state additions and subtractions, so the gain rides in with the rest of your income and is taxed at the ordinary state rates. There is no reduced state rate for holding an apartment a long time. If you live in the five boroughs, New York City resident income tax applies to that income as well, on top of the state figure. Your accountant runs both.
Sellers who no longer live in New York have a second mechanism to plan for. A nonresident selling New York real property files Form IT-2663 and pays estimated state income tax on the gain at closing, before the deed records. On the 2026 form the estimated tax is computed at 10.9% of the gain, which the instructions describe as the rate "equal to the highest rate of tax for the tax year." It is a prepayment rather than a final bill: you take credit for it when you file your New York return, and an overpayment comes back as a refund.
Co-op shares use a different form
The IT-2663 instructions say directly that the form is not used for a nonresident's sale of stock in a cooperative housing corporation. Co-op share sales go on Form IT-2664 instead. Since roughly two thirds of Manhattan's apartment stock is co-op, this is the more common form in practice, and closing attorneys handle it as a matter of routine.
There is also a principal-residence exemption in the statute. Where the property qualified as the seller's principal residence within the meaning of the federal rules, the payment obligation can be claimed exempt on Form TP-584, Schedule D. Your attorney files that at closing.
Second homes, pied-a-terres, and investment property
Section 121 is a primary-residence rule. A weekend place, a pied-a-terre, or an apartment you bought for a child in school does not qualify, and the entire gain after basis and selling costs is taxable. Owners of non-primary NYC apartments have a second reason to run the numbers now, since the pied-a-terre surcharge notices that went out this summer changed the annual carrying cost of holding one.
Property held for investment sits in a different part of the code. A Section 1031 like-kind exchange lets an owner of investment or business real property defer the gain by rolling it into replacement property, under strict identification and closing deadlines and through a qualified intermediary. It does not apply to a home you live in, the deadlines are unforgiving, and the deferral is not forgiveness. If you own a rental unit or a small building and want that route, bring in a CPA and a qualified intermediary before you sign a listing agreement, not after you have an accepted offer.
Inherited property is a different calculation entirely
When you inherit an apartment, your basis is generally reset to its value as of the date of death rather than what the person who left it to you originally paid. An apartment bought in 1978 and inherited in 2026 carries a basis near its 2026 value, which is why so many estate sales generate far less taxable gain than the family expects, and sometimes none at all. The mechanics of the sale itself, from the co-op board's role in an estate transfer to the paperwork you need before you can list, are covered in the guide to selling inherited property in NYC.
What to do before you list
I have been licensed since November 2001, and across the 1,100-plus transactions tracked on this site the sellers who get through the tax conversation cleanly are the ones who did three unglamorous things early.
Build the basis file
- Closing statement from your purchase
- Contractor invoices and cancelled checks
- Building assessments for capital work
- Permits and architect fees
Price the exit
- Commission, transfer taxes, attorney
- Flip tax figure from the managing agent
- Payoff letter on any mortgage
- Estimated taxable gain, from your CPA
Third: talk to your accountant before the listing goes live, not in April. Timing a closing, deciding which spouse is on title, and confirming whether you clear the 24-month use test are all decisions that are cheap to make in advance and expensive to fix after a contract is signed.
See your net before you list
Run your price through the seller net proceeds calculator to price commission, both transfer taxes, and a co-op flip tax in one pass. It runs in your browser and nothing is stored.
Calculate Your Net ProceedsFrom there, the flip tax guide explains the building fee that shows up in the co-op column above, and the selling in NYC hub covers pricing, preparation, and what the listing period actually looks like across the five boroughs.
Thinking about selling this year?
Send me the building and what you paid, and I will send back a pricing read and a net proceeds estimate you can hand to your accountant. Bilingual, English and Spanish, all five boroughs and the Hudson Valley.
Schedule a Free ConsultationThis is planning context, not tax, legal, or accounting advice. I am a licensed real estate broker, not a CPA or a tax attorney. Federal figures here come from IRS Topic 701 and Publication 523; New York figures come from Form IT-2663 and its instructions at tax.ny.gov. Rules change and individual facts change the answer, so confirm your own numbers with your CPA before you sign anything.
