As Staten Island’s real estate market maintains steady momentum with median sales prices holding at $700,000, the timing of your home sale could significantly impact your tax liability. With just weeks remaining in 2025, savvy Staten Island sellers are weighing whether to close before year-end or wait until 2026—a decision that could mean thousands of dollars in tax savings or costs.
This comprehensive guide examines the critical tax implications Staten Island home sellers face as we approach December 31, including the newly enhanced federal estate tax exemptions, capital gains strategies, and the sophisticated 1031 exchange opportunities now available to New York property owners.
The Current Staten Island Market Context
New listings in the borough increased 18.3 percent to 246 last month, as compared to December of the previous year. When measured against December 2023, pending sales on the Island were up 22.5 percent to 289 last month; inventory levels fell 27.5 percent to 859 units, and the days on market statistic was down 11 percent to 65 days.
This seller-friendly environment creates unique opportunities for strategic tax planning. Winter market (December-February) experiences lowest activity. Days on market reach 70-90 days. Motivated sellers provide best negotiation opportunities for buyers, which means sellers closing in December may face less competition but should factor extended closing timelines into their tax planning.
Capital Gains Tax Strategies for Staten Island Sellers
Understanding Your Tax Exposure
When selling your Staten Island property, capital gains taxes represent one of your largest potential expenses. Subtract that from the sale price and you get the capital gains. When you sell your primary residence, $250,000 of capital gains (or $500,000 for a couple) are exempted from capital gains taxation.
For investment properties or second homes on Staten Island, the tax implications differ significantly. For single filers with taxable income up to $44,625, and for married couples filing jointly with taxable income up to $89,250. 15% Rate: For single filers with taxable income between $44,626 and $492,300, and for married couples filing jointly with taxable income between $89,251 and $492,300. 20% Rate: For single filers with taxable income exceeding $492,300, and for married couples filing jointly with taxable income exceeding $492,300.
The December 31 Timing Decision
Closing your Staten Island home sale before December 31, 2025, versus waiting until January 2026 involves several crucial considerations:
Tax Rate Optimization: For 2025, you qualify for the 0% long-term capital gains rate if your taxable income is $48,350 or less for single filers, or $96,700 or less for married couples filing jointly. But new tax breaks under President Donald Trump’s “big beautiful bill” could expand eligibility by reducing taxable income for some investors.
Depreciation Recapture Considerations: Staten Island investment property owners face additional complexity. If you sell real estate with previously claimed depreciation deductions, you might face a capital gains tax of up to 25% on the unrecaptured depreciation. Note: This taxable amount is known as “unrecaptured Section 1250 gain”.
1031 Exchange Opportunities: New York’s Game-Changing Ruling
Staten Island real estate investors received significant news in 2025 that dramatically expands their tax deferral options. Earlier this year, a New York City Administrative Law Judge found that the taxpayers’ sale of a tenancy-in-common (“TIC”) interest in real estate qualified for section 1031 “like-kind exchange” treatment even though the underlying property had been owned that very same day by a partnership, which distributed the property to its partners on the day of the sale in a “drop & swap” transaction.
What This Means for Staten Island Sellers
The June 2025 ruling opens new strategies for Staten Island property partnerships and LLCs. This ruling, dated June 12, 2025, opens the door for “Drop-and-Swap” transactions in New York as a viable option for continuing §1031 exchanges (even where the formal “drop” occurs substantially simultaneously with the sale.
Critical 1031 Exchange Timeline Requirements:
- Within 45 days of the sale, identify potential replacement properties in writing, following the new documentation protocols now required in 2025
- Complete the purchase of the replacement property or properties within 180 days, making sure all paperwork aligns with IRS standards and new regulatory clarifications
New York State Compliance
New York State taxes the reported income you have at the federal level. If you’re not reporting gain on the sale to the IRS, you are not reporting in New York. Generally, New York has no state specific requirements for 1031 Exchanges with one exception. The exception is for non residents who sell real property in New York.
Staten Island sellers conducting 1031 exchanges should work with qualified intermediaries familiar with New York’s specific requirements, as New York State has taken an aggressive approach to auditing like-kind exchanges and applying federal guidance and case law to those audits. The Department of Taxation frequently scrutinizes closing statements and other financial records to uncover inconsistencies and unreported income, particularly in reverse and build-to-suit exchanges.
Estate Tax Considerations: The New $15 Million Exemption
The estate tax landscape has fundamentally shifted for Staten Island property owners. Due to the One Big Beautiful Bill Act, the federal estate tax exemption will increase to a new, “permanent” $15 million exemption as of January 1, 2026. Per the One Big Beautiful Bill Act (the Act), the new $15 million gift, estate, and generation-skipping exemption amount will continue to be indexed annually for inflation.
Strategic Implications for High-Value Staten Island Properties
For Staten Island homeowners with substantial estates, this change eliminates the previous “use it or lose it” urgency. The passage of the OBBBA has provided clarity for many families concerned about the estate tax exemption sunset. With a higher, inflation-adjusted exemption now in place, the urgency of “use it or lose it” has diminished.
Key Planning Opportunities:
- For families anticipating significant appreciation or liquidity events, gifting in 2025 can shield future growth from estate tax exposure. Even though the exemption increases in 2026, using part of the current exemption now can help “lock in” today’s asset values and remove future appreciation from the taxable estate
- Multi-State Considerations: Several states impose their own estate or inheritance taxes, often with much lower exemption thresholds. These state-level taxes can create unexpected burdens if not properly addressed
Practical Year-End Strategies for Staten Island Sellers
For Primary Residences
Staten Island homeowners selling their primary residence should carefully document their qualification for the Section 121 exclusion. This is generally true only if you have owned and used your home as your main residence for at least two out of the five years prior to the sale.
Action Items Before December 31:
- Verify your ownership and occupancy dates
- Calculate your adjusted basis including home improvements
- Document all selling expenses that can reduce your taxable gain
For Investment Properties
Investment property owners in neighborhoods like Park Hill and St. George face different considerations:
- Timing Market Conditions: Spring market (March-May) generates highest buyer activity, shortest days on market (35-45 days average), strongest competition, potential multiple-offer scenarios. Summer market (June-August) maintains momentum with families relocating before school year. Current days on market: 41 days average (September 2025)
- 1031 Exchange Preparation: Begin identifying replacement properties now if considering a tax-deferred exchange. Browse current Staten Island investment properties to understand your replacement options.
- Cost Basis Documentation: Gather all records of improvements, depreciation schedules, and original purchase documents before initiating your sale.
Advanced Tax Strategies: Combining Techniques
The Installment Sale Option
For Staten Island sellers who don’t need all proceeds immediately, structuring an installment sale can spread capital gains over multiple tax years, potentially keeping you in lower tax brackets.
Charitable Remainder Trusts
High-net-worth Staten Island property owners might consider a Charitable Remainder Trust (CRT) to defer capital gains while generating income and supporting charitable causes. This strategy works particularly well for highly appreciated properties in areas like Todt Hill.
Opportunity Zone Investments
With portions of Staten Island designated as Opportunity Zones, sellers can defer and potentially reduce capital gains by reinvesting proceeds into qualified Opportunity Zone funds within 180 days of sale.
Working with Staten Island Tax Professionals
Given the complexity of year-end tax planning, Staten Island sellers should assemble a qualified team:
- Tax Advisor: Choose a CPA familiar with New York State and NYC tax codes
- Real Estate Attorney: Essential for structuring transactions properly, especially for 1031 exchanges
- Qualified Intermediary: Required for 1031 exchanges to ensure compliance
- Real Estate Agent: Work with experienced Staten Island agents who understand tax-efficient transaction timing
Critical December 31 Checklist
As you approach year-end, Staten Island sellers should:
- Calculate your expected capital gains tax liability for 2025 vs. 2026
- Determine if you qualify for primary residence exclusion
- Evaluate 1031 exchange feasibility and identify potential properties
- Review estate planning implications with the new $15 million exemption
- Consider installment sale or other deferral strategies
- Schedule closing date strategically based on tax analysis
- Gather all documentation for cost basis calculations
- Consult with tax professionals for personalized advice
The Bottom Line: Making Your Decision
The decision to close your Staten Island property sale before December 31, 2025, or wait until 2026 depends on your unique financial situation. With Most 2026 forecasts show rates potentially easing, but staying in the 5.8% – 6.5% range, market conditions remain relatively stable, giving you flexibility to prioritize tax optimization.
For many Staten Island sellers, the enhanced estate tax exemption removes previous urgency, while the newly approved “drop-and-swap” 1031 exchange options create unprecedented flexibility for investment property owners. However, those near capital gains tax bracket thresholds or facing significant depreciation recapture may find substantial savings by timing their transaction strategically.
Take Action Today
With limited time before year-end, Staten Island sellers must act quickly to implement tax-saving strategies. Contact Robert DeFalco Realty for consultation on timing your sale for maximum tax efficiency. Our team connects you with qualified tax professionals and coordinates transaction timing to optimize your financial outcomes.
Remember, while tax considerations are important, they should align with your overall financial goals and life circumstances. The Staten Island real estate market’s current strength provides flexibility, but proper planning and professional guidance remain essential for maximizing your after-tax proceeds from your property sale.
Disclaimer: This article provides general information about tax strategies and should not be considered personal tax advice. Consult with qualified tax professionals and financial advisors before making decisions about your specific situation.