IT-2663 — Nonresident Real Property Estimated Income Tax

Overview

Form IT-2663 is the Nonresident Real Property Estimated Income Tax Payment Form issued by the New York State Department of Taxation and Finance. It is required when real property in New York is sold or transferred by a nonresident of the state.

For estates, this is particularly important: even if the decedent was a New York resident, the estate itself may be treated as a nonresident taxpayer for purposes of this filing. If the estate sells real property, the executor or administrator generally must file the IT-2663 and pay the estimated tax before closing.

Who Must File the IT-2663

The IT-2663 is required for any seller or transferor who is a nonresident of New York State. For estates, the filers who commonly must file include:

• Estates: The executor or administrator files on behalf of the estate when it sells real property in New York
• Trusts: The trustee files when a nonresident trust sells New York property
• Individuals: A beneficiary who inherited property directly and lives outside New York

Stepped-Up Basis

When you inherit property, your cost basis (the value used to calculate gain or loss) is generally "stepped up" to the fair market value of the property on the date of the owner's death. This is called a stepped-up basis and can significantly reduce the tax you owe when you sell.

Example

• The decedent purchased the house for $200,000 in 2005
• The fair market value on the date of death was $650,000
• You sell the house for $700,000
• Taxable gain: $700,000 - $650,000 = $50,000

Without the stepped-up basis, the taxable gain would be $500,000 ($700,000 - $200,000). The stepped-up basis saves significant tax.

How to Calculate the Estimated Tax

The IT-2663 calculates estimated tax on the gain from the sale. Here are the basic steps:

1. Determine the sale price (Line 1): The gross sale price of the property
2. Determine your cost basis (Line 2): For inherited property, this is generally the fair market value on the date of death (stepped-up basis)
3. Subtract selling expenses (Line 3): Broker commissions, closing costs, pre-sale repair expenses
4. Calculate the gain (Line 4): Sale price minus cost basis minus expenses = estimated gain
5. Apply the tax rate (Line 5): The highest New York income tax rate that may apply to your situation. For estates, this is typically 10.9%.

Calculation Example

Filing Deadline

Form IT-2663 must be filed with the New York Department of Taxation and Finance at least 15 business days before the closing date. This is not a flexible deadline — if you do not file in time, the Department will not issue the required approval and the closing cannot proceed.

Plan backward from your closing date:

1. Confirm the closing date with the buyer and attorneys
2. Count 15 business days backward (exclude weekends and holidays)
3. File the IT-2663 before that deadline
4. Add a few extra days as buffer in case of errors or rejections

How to File the IT-2663

There are two methods for filing Form IT-2663:

Option 1: Online Filing (Recommended)

File electronically through the New York Department of Taxation and Finance online system. Online filing is faster and allows you to track the status of your form.

1. Visit the New York Department of Taxation and Finance website
2. Search for 'IT-2663' in the forms section
3. Complete the form with all required information
4. Submit the estimated tax payment along with the form

Option 2: Mail Filing

Send the completed form with a check or money order to:

NYS Tax Department
TTTB-RETT
W.A. Harriman Campus
Albany, NY 12227-0801

IT-2663 Exemptions

Not everyone who sells property in New York must pay estimated tax. The following exemptions may apply:

• Principal residence exemption: If the property was the seller's principal residence, the gain may be partially or fully exempt (up to $250,000 for individuals, $500,000 for married couples)
• Sale at a loss: If the sale price is less than the stepped-up basis, there is no gain and no tax is owed. You must still file the form, but the payment will be $0.
• Transfer between spouses: Transfers between spouses or as part of a divorce are generally exempt
• Sale price of $1 or less: Nominal transfers do not require estimated tax payment, but filing may still be required

Installment Sales

If the sale is structured as an installment sale (where the buyer pays you in installments over time), Section B of the IT-2663 requires additional information. You must indicate:

• That you are reporting the gain under the installment method for federal income tax purposes
• The duration of the installment agreement (in months and years)

With installment sales, the estimated tax is calculated on the total gain amount, not just the portion received in the first year. This means the upfront payment can be significant even if you only receive a portion of the sale price at closing.

Common Mistakes with the IT-2663

1. Filing too late: The most common error. Do not wait until the last two weeks before closing. File at least 3-4 weeks early to have a buffer.
2. Using the original cost basis instead of stepped-up basis: For inherited property, the basis is the date-of-death value, NOT what the decedent originally paid. Using the original purchase price results in overpaying taxes.
3. Not getting a date-of-death appraisal: Without a professional appraisal, you are guessing your cost basis. This can lead to overpaying or underpaying tax.
4. Forgetting to deduct selling expenses: Real estate agent commissions, closing costs, attorney fees, and pre-sale repairs reduce your taxable gain.
5. Confusing IT-2663 with IT-2664: IT-2663 is for nonresidents. IT-2664 is for New York residents. Using the wrong form will cause a rejection.
6. Not including payment: The form must be accompanied by the estimated tax payment. Filing without payment will be rejected.
7. Assuming principal residence is exempt: For estates, the principal residence exemption generally does not apply. The estate does not "live" in the house.

Frequently Asked Questions

Do I need to file the IT-2663 if there is no gain?

Yes. Even if the property sells for less than the stepped-up basis (i.e., at a loss), the form must still be filed. The payment will be $0, but the filing is still required for the closing to proceed.

Can I get a refund if I overpay?

Yes. The IT-2663 is an estimated payment. When you file your New York income tax return (IT-203 for nonresidents), the amount paid with the IT-2663 is credited against your actual tax liability. If you overpaid, you will receive a refund.

What happens if closing is delayed after filing?

If the closing date changes, you may need to amend your filing. Contact the New York Department of Taxation and Finance to notify them of the date change.

Who is responsible for filing — the attorney or the executor?

The executor or administrator is legally responsible. However, in practice, the estate attorney or the closing attorney frequently prepares and files the form on behalf of the fiduciary. Confirm with your attorney who will handle this filing.

Is the IT-2663 the same as the ET-117?

No. They are different forms that serve different purposes:

• IT-2663 — Estimated tax on the gain from selling the property (income tax)
• ET-117 — Release of estate tax lien (estate tax). You need both to close an estate property sale.