Largely yes
Holding, leasing or managing real property does not by itself make you an unincorporated business.
The short answer
Managing is inside the exemption
Self-managing your own building does not cost you it.
Dealing or servicing others pulls you in
What pulls you back in is dealing in property, or running services and management for other people.
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How the carve-out works
Real estate gets its own express carve-out
New York City charges an unincorporated business tax on businesses that are not corporations, so sole proprietorships, partnerships, LLCs treated as partnerships, and single-member LLCs treated as disregarded. Real estate gets its own express carve-out.
Managing your own property is inside the exemption. The statute says an owner, lessee, or fiduciary is not deemed to be engaged in an unincorporated business solely by reason of holding, leasing, or managing real property. Managing is in that list by name.
01What the exemption covers
Four activities the exemption reaches
Holding, leasing, managing your own property — and the ordinary services a landlord provides alongside the space.
Holding
Owning the property, including through a partnership or an LLC.
Leasing
Renting it out, including long-term and ground leases.
Managing your own property
Running your own building. The number of buildings does not by itself change the answer, and neither does doing the work yourself rather than hiring an agent.
Incidental services to tenants
The ordinary things a landlord provides alongside the space.
02What takes you back in
Six activities that pull you back inside UBT
The test is what the activity is and who it serves — not hours worked.
Being a dealer
The exemption expressly excludes a dealer holding real property primarily for sale to customers in the ordinary course of business. Buying to flip is a different activity from holding to rent.
Managing property for other people
Running a management business for third parties is a service business and is taxable, even though managing your own building is not. The test is what the activity is and who it serves.
Charging management fees through a related entity
An affiliated company that bills management fees to the property-owning entity is providing services to another person, even where the ownership overlaps. It is a common New York City structure and a common source of assessments.
Services well beyond the landlord function
A short-term rental operation with daily turnover, cleaning, and concierge starts to look like a hotel rather than a lease, and can be treated as a business.
Brokerage and development as a trade
A brokerage run as a sole proprietorship or partnership is a service business. So is development carried on as a trade rather than as an investment in a specific asset.
Public parking
Monthly or longer-term parking charges paid by building tenants at a garage open to the public sit inside the exemption, subject to specific reporting. Transient public parking is a separate question. Failing to report as required can cause the parking service to be treated as a business rather than incidental to the property.
03Section 11-502(d) in and out
Holding, leasing and managing stay out. Dealing and services do not.
Stays outside UBT
- ✓Holding and leasing your property
- ✓Managing your own property
- ✓Incidental services to your tenants
- ✓Tenant parking, reported as required
Pulled back into UBT
- ✗Dealing, held mainly for sale
- ✗Managing for others, including a related entity
- ✗Hotel-style services and daily turnover
- ✗Parking not reported as required
The test is what the activity is and who it is for.
04Business and property together
Running a business and owning property in the same year
Carrying on a genuine business does not cost you the exemption on the real estate.
How it appears on the return
Real estate income is subtracted, not taxed
Line item
Total business income
—
Subtraction
Rental income + tied deductions
UBT computation
Business income only, real estate carved out
Getting that split right on the return matters as much as qualifying in the first place. A correct exemption reported incorrectly still produces an assessment.
Where an owner runs an unincorporated business and also holds, leases or manages real property, the property side stays outside that business to the extent it is held for producing rental income.
If the exemption does not apply, the entity itself owes the tax and files its own city return. The partners do not report it on their personal returns the way they report the federal income.
05Four questions
Four questions that decide whether the exemption applies
- 01
What is the entity doing?
Holding and renting, or buying and selling, or providing services. That is the test. Hours worked are not.
- 02
Who are the services for?
Your own tenants, or other people's.
- 03
Is anything at the property open to the public?
Parking in particular carries its own reporting requirement.
- 04
Is the structure a corporation?
If so, UBT does not apply at all. The Business Corporation Tax applies instead.
06FAQ
Common questions about the Section 11-502(d) exemption
Does a rental LLC pay NYC unincorporated business tax?
No. An LLC treated as a partnership, and a single-member LLC treated as disregarded, both get the same exemption an individual owner gets. The rental activity alone does not create a UBT liability.
Does managing my own rental property make me subject to UBT?
No. Section 11-502(d) lists managing beside holding and leasing, so running your own property is covered.
Is a real estate dealer exempt from UBT?
No. A dealer who holds property mainly for sale to customers is written out of the exemption.
Can I deduct property expenses if the exemption applies?
No. Section 11-507(16) blocks the deduction for interest, depreciation and other costs tied to exempt real estate. The exemption removes the income and the expenses together, so this is a rule about the UBT computation rather than a denial of the deductions themselves. They still apply on your federal and New York State returns.
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On business structure, and on complex partnership returns
“We had over a hundred clients this last tax season that were in the wrong business structure. And on average, they overpaid anywhere between a few thousand to even tens of thousands of dollars in tax.”
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Check your UBT position
Check your UBT position
Tell us what the entity owns, what it does, and who it does it for. We will tell you whether the exemption applies and how to report it. Call (212) 641-0673 or send the contact form. No charge for the conversation.
Reviewed by George Dimov, CPA, New York, NY. Serving clients in all 50 states, 15+ years advising New York property owners and partnerships on city business taxes. President of George Dimov, CPA, a New York City firm serving clients across the five boroughs and nationwide.