Anthony Licciardello | May 22, 2026
Staten Island
By Anthony Licciardello, The Prodigy Team · May 6, 2026
Staten Island sits inside the five-borough New York City tax footprint, which means a home sale on Nicolosi Drive in Todt Hill, a semi-attached Cape in New Springville, or a renovated colonial in Annadale all face the same three-layer capital gains stack: federal, New York State, and New York City. Sellers in Long Island, Westchester, and New Jersey deal with two layers. Staten Island sellers deal with three. That single structural fact reshapes pricing decisions, closing-cost modeling, and pre-listing tax planning across every price tier on the borough.
The good news: the federal Section 121 primary residence exclusion erases the entire bill for the majority of Staten Island sellers. The challenging news: longtime owners on the borough's higher-end streets — Todt Hill, Grymes Hill, Lighthouse Hill, the waterfront pockets of Tottenville and Great Kills — routinely run gains that exceed the §121 cap and end up writing meaningful checks to three different tax authorities. The first step in any Staten Island home sale conversation in 2026 is figuring out which side of that line you fall on, and the second step is structuring the timing and paperwork so the bill is the smallest legally allowable number.
Section 121 of the Internal Revenue Code is the single most valuable tax tool available to Staten Island home sellers, and it is also the most misunderstood. The mechanics are clean: a single filer can exclude up to $250,000 of gain from federal taxation, and a married couple filing jointly can exclude up to $500,000 of gain, provided both the ownership test and use test are satisfied during the five-year window ending on the closing date. The exclusion is not a deduction and not a credit — it removes the qualifying gain from taxable income entirely, before any rate is applied. New York State and New York City both honor the federal §121 exclusion when calculating their portions of the bill, which means a properly qualified Staten Island sale can erase capital gains tax across all three layers simultaneously.
Where sellers run into trouble: the once-every-two-years frequency rule. If you sold a primary residence in 2024 and used §121 on that sale, you cannot use it again until 24 months have passed from that closing date. Sellers who flipped a starter home in Bay Terrace and are now selling a move-up property in Eltingville need to confirm the calendar before listing. The other common trap is the use test for couples: ownership can sit on one spouse's name, but both spouses must individually pass the 2-of-5 year residency test to claim the full $500,000 exclusion on a joint return.
Partial §121 exclusions are available for sellers who fall short of the 24-month thresholds because of qualifying circumstances — job relocation more than 50 miles from the home, health-related moves, divorce, death of a spouse, or other unforeseen circumstances defined in IRS Publication 523. The partial exclusion is calculated as a fraction of the full amount based on actual months of ownership and use. A married couple who owned and lived in a Stapleton townhouse for 18 months before relocating for work could claim up to $375,000 of exclusion ($500,000 multiplied by 18/24). The partial exclusion is fact-specific and worth a CPA conversation before closing.
Once gain crosses the §121 threshold, the remaining amount runs through three separate rate calculations. Staten Island longtime owners — the homeowner who bought a Todt Hill colonial for $410,000 in 1997 and is selling for $1.95 million in 2026 — cross this line frequently. Here is what the rate map looks like in 2026.
Adding the layers together: a high-income Staten Island seller in the top brackets faces a combined effective rate approaching 38% on the portion of gain above the §121 exclusion. That figure is a top-end ceiling, not a typical scenario. A more representative middle-income Staten Island seller sits at roughly 15% federal + 0% NIIT (under threshold) + 6% state + 3.5% city — about 24.5% combined on the taxable gain. Either way, the math compounds quickly. A $200,000 taxable gain at 24.5% combined is a $49,000 tax bill, and at the top end the same $200,000 produces a $77,000 bill.
Two Staten Island situations deserve flagging. First, sellers who relocate to Florida or another no-state-tax jurisdiction before closing are sometimes told they have escaped New York tax. They have not. New York State taxes the gain on New York real property regardless of seller residency, and nonresident sellers are required to file Form IT-2663 at closing with an estimated tax payment. Second, sellers who maintain a primary residence elsewhere and used the Staten Island property as a second home or rental do not qualify for the §121 exclusion at all — the use test fails, and the entire gain runs through the rate stack.
Transfer taxes are not capital gains taxes, but they belong in the same conversation because they hit the same closing statement and they reduce the seller's net proceeds in exactly the same way. On a $900,000 Staten Island sale, the seller pays roughly $3,600 in NYS transfer tax (0.4%) plus $12,825 in NYC RPTT (1.425%), totaling about $16,425 in transfer taxes alone. That figure is independent of capital gains tax and applies regardless of whether the §121 exclusion erases the gain.
Staten Island has more million-dollar-plus inventory than buyers from other boroughs typically realize. Todt Hill alone routinely produces $2M to $5M sales, and the borough's all-time record — the $4.4 million Nicolosi Drive sale — sits cleanly in the 1.5% mansion tax tier. Although the buyer technically writes the mansion tax check at closing, the dynamic is structurally a seller cost: in a competitive offer, buyers price their bid net of expected closing costs, and the mansion tax effectively reduces what the seller takes home. Pricing strategy at the $1M, $2M, $3M, and $5M cliff thresholds matters more in 2026 than ever, because crossing a tier increases the rate against the entire sale price, not just the marginal dollar.
Capital gain is calculated against adjusted basis, not original purchase price. Adjusted basis equals what you paid plus the cumulative cost of qualifying capital improvements over the years of ownership. For Staten Island sellers who bought decades ago and have done major work on the property, the difference between original-price-only basis and properly-tracked adjusted basis is often $80,000 to $200,000 of additional excludable amount. Receipts matter. Estimates do not.
| Counts as Basis Increase | Does NOT Count |
|---|---|
| New roof, full kitchen renovation, finished basement | Repainting, fixing a leaky faucet, lawn care |
| Central air installation, new boiler, HVAC replacement | Annual heating service, filter replacements |
| Room additions, dormers, full bathroom rebuilds | Wallpaper, minor cosmetic updates, light fixtures |
| New windows, siding replacement, permanent landscaping | Window cleaning, gutter cleaning, mowing |
| Driveway paving, deck construction, in-ground pool | Driveway sealcoating, deck staining, pool chemicals |
| Original purchase closing costs (title, attorney, transfer tax) | Mortgage interest, property tax (deducted elsewhere) |
The dividing line between a capital improvement and a routine repair is whether the work materially extends the life of the home, adds value, or adapts the property to a new use. The IRS does not require receipts to be perfect, but it does require them to be credible. A homeowner who finished the basement in 2008 and cannot produce contractor invoices will have a harder time substantiating the basis adjustment than one who kept a folder. For Staten Island sellers preparing to list, the single highest-leverage hour of pre-listing work is sitting at the kitchen table with a yellow pad and reconstructing every capital improvement made since the home was purchased — with dates, contractors, and dollar amounts. A good CPA will turn that list into a defensible adjusted basis figure that often saves five-figure tax dollars.
Maria, a single filer, bought a semi-attached home in New Springville in 2008 for $385,000. Over 18 years of ownership she replaced the roof ($14,000), finished the basement ($28,000), put in a new kitchen ($35,000), upgraded HVAC ($9,000), and replaced the windows ($11,000) — total qualifying improvements of $97,000. Her closing costs from the 2008 purchase added $8,000 to basis. Her adjusted basis on closing day in 2026 is $490,000.
Maria's gain of $235,000 fits cleanly under her $250,000 single-filer §121 exclusion, and her capital gains tax across all three layers is zero. The story changes meaningfully if Maria had not tracked her capital improvements: without the $97,000 of basis additions, her capital gain would have been $332,000, the §121 exclusion would have absorbed $250,000, and the remaining $82,000 of taxable gain would have produced a tax bill of roughly $20,000 across federal, state, and city. The receipts folder was worth $20,000 in real money. That is a typical Staten Island result.
The strategies that reduce capital gains tax on a Staten Island home sale almost all require execution before the listing goes live. After contract signing, optionality collapses. Here is what the seller's pre-listing checklist looks like in 2026.
Retrieve the HUD-1 or Closing Disclosure from when you bought the home. Original purchase price and original closing costs both flow into adjusted basis.
Write out every improvement made since purchase with dates and dollar amounts. Pull credit card statements, bank records, and contractor invoices. Total it up.
Check the calendar. If you used §121 on a previous home sale within the last 24 months, the next sale gets nothing under the exclusion.
Estimate gain before listing. Sale price minus selling costs minus adjusted basis equals capital gain. Subtract the §121 exclusion to get taxable gain.
Strategies like timing across tax years, installment sale structuring, or 1031 exchange for investment property only work when planned in advance.
Twenty-two years closing residential transactions on Staten Island gives you a working sense of which sellers are about to be surprised by a tax bill and which ones are not. The pattern is consistent. Sellers in the under-$700K tier with a single §121-eligible filer or a married joint filing couple almost universally owe zero capital gains tax — the exclusion absorbs the gain, the receipts folder reconstructs basis as a margin of safety, and the closing produces clean net proceeds. Sellers in the $1.5M to $4M tier — Todt Hill, Grymes Hill, the established sections of Tottenville and Annadale — are the ones who need to walk into the listing process with a CPA already engaged.
The structural unfairness of New York's tax treatment of capital gains is real and worth naming. New York State does not provide a preferential long-term capital gains rate — the gain on a home held for thirty years is taxed at the same rate as ordinary wage income. New York City stacks on top with no preferential treatment of its own. The only meaningful relief in the system is the federal §121 exclusion, which has not been adjusted for inflation since 1997 when the $250K / $500K thresholds were originally set. A $500,000 exclusion in 1997 dollars is worth roughly $980,000 in 2026 dollars. The federal cap has lost half its real value over three decades, and the consequence falls disproportionately on longtime Staten Island homeowners who have lived in the same property since the 1990s or earlier.
For sellers planning a 2026 or 2027 closing, the strategic imperative is clean preparation: original closing documents pulled, capital improvements reconstructed and totaled, §121 frequency confirmed, and a CPA conversation booked before listing. For sellers above the §121 threshold, additional strategies — installment sale structuring, 1031 exchange for investment properties, charitable trust planning at the very high end — require longer lead times and specialist counsel. The borough's market remains strong; the tax planning is what separates the sellers who keep more of their proceeds from the ones who write surprised checks the following April.
Most Staten Island sellers owe zero federal, state, or city capital gains tax because the IRS Section 121 primary residence exclusion erases up to $250,000 of gain for a single filer or up to $500,000 for a married couple filing jointly, provided the seller meets the 2-of-5-year ownership and use tests and has not used §121 on another sale in the prior 24 months. Sellers whose gain exceeds the exclusion run the excess through three rate layers: federal long-term capital gains (0%, 15%, or 20%), the 3.8% Net Investment Income Tax for higher earners, New York State (3.9% to 10.9%), and New York City (3.078% to 3.876%). A combined effective rate of 25% to 38% on the taxable portion is typical depending on income.
A $1.5 million Staten Island sale falls in the first mansion tax tier ($1M to $1.99M), which charges 1% on the entire sale price — $15,000 in mansion tax. The mansion tax is technically a buyer obligation in New York City but functions as a seller-side cost in pricing negotiations. Crossing into the next tier at $2 million increases the rate to 1.25% on the entire price, so the cliff effect at each threshold matters: a $2.05 million sale triggers $25,625 in mansion tax versus $19,990 at $1.99 million. Pricing strategy at $1M, $2M, $3M, and $5M thresholds is a meaningful planning conversation on Staten Island's higher-end inventory.
No. New York State taxes the gain on New York real property regardless of where the seller lives at the time of sale. Nonresident sellers are required to file Form IT-2663 at closing and pay estimated nonresident income tax on the gain. Moving to Florida before sale eliminates the New York City resident tax (3.078% to 3.876%) on the gain but does not eliminate the New York State tax (3.9% to 10.9%). The federal §121 exclusion still applies if ownership and use tests are met. Staten Island sellers planning a Florida relocation should coordinate the closing date carefully with a CPA to model the residency-status trade-offs.
Capital improvements that increase basis include new roof, full kitchen renovation, finished basement, central air or HVAC replacement, room additions, dormers, full bathroom rebuilds, new windows, siding replacement, driveway paving, deck construction, in-ground pool, and permanent landscaping. Routine repairs and maintenance do not increase basis — repainting, fixing leaks, lawn care, gutter cleaning, sealcoating, and similar upkeep do not qualify. Original purchase closing costs (title, attorney, transfer tax) also flow into adjusted basis. Receipts and contractor invoices are required to substantiate the additions; reconstructed estimates are weaker but still better than nothing if originals are lost.
Over a 22-year career, Anthony has been responsible for more than 5,000 real estate transactions across New York and New Jersey, including the largest residential home sale in Staten Island history at $4.4 million on Nicolosi Drive, and a $2.4 million Far Hills, NJ mansion sale in 2022. A recognized innovator in digital real estate marketing, Anthony was named top Realtor.com blogger in 2009 and 2010, and has been featured in The New York Times, AM New York, and The Real Deal. He produces the Above the Streets cinematic aerial video series and operates one of the largest digital real estate marketplaces in the region — including a 25,000-member New York to New Jersey and Florida relocation community and over 250,000 monthly views across channels.
Licensed: NYS/NJ Real Estate Broker · Phone: (718) 873-7345 · Profile: prodigyre.com/agents/anthony-licciardello
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