When it comes to capital gains, New York State is experiencing a golden moment. State officials say that between 2002 and 2005, reported income from capital gains has nearly tripled. While tax receipts from 2005 are not entirely collected, the state expects capital gains income to exceed $70 billion, surpassing expectations and resulting in more than $4 billion in tax revenue for the state.

Looking at capital gains tax receipts since 2002, state tax officials said a substantial fraction — as much as half — of the increase has been driven by the New York City area’s sizzling real estate market, particularly in the last two years. The state’s budget division estimates that in 2004 and 2005, the real estate sector contributed a total of $1.4 billion in capital gains taxes. The state’s forecast suggests that tax revenue from residential real estate capital gains has peaked and will decline over time.

The president of Miller Samuel, an appraisal firm, Jonathan Miller, said rising capital gains have been partially driven by price appreciation of residential properties, which has averaged about 20% annually since 2001, and by the increased volume of transactions, which have been at or near record highs, peaking at the end of 2004. The real estate boom was the product of a number of factors, including 40-year lows of mortgage rates, and a strengthening local economy.

As the condominium-fueled real estate boom subsides, real estate experts say a strong office market and apartment rental market are likely to pick up some of the slack. Vacancy rates in the Manhattan office market are now reaching the lowest level since before September 11, 2001, and average rents are approaching all-time highs, with more leases going for $100 a square foot than ever.

The higher rents are pushing up the value of office buildings. Earlier this year, Boston Properties sold the 1.2 million-square-foot office building at 280 Park Avenue to an investment company in Dubai, Istithmar, for about $1.2 billion, or $1,018 a square foot, a new record.

Mr. Miller, the appraiser, said that low vacancy rates are driving up some apartment rents by about 25%, boosting the value of the rental properties by a similar factor. The increased values are attracting investors and stimulating transactions, he said.

The changing real estate market is likely to result in a new stream of tax revenue, some in the form of revenue derived from capital gains, but Mr. Miller said it will not show up for one or two years and is still unlikely to replace the tax revenue generated in the last few years from the condo boom.

The way that the capital gains tax is collected makes it difficult to determine exactly the proportion of capital gains receipts are from real estate transactions, and what is derived from other investments; like stocks, bonds, or other assets. State officials said that gains from equity and debt markets have been strong, but not strong enough to explain the spike in reported capital gains. Another factor boosting capital gains receipts is the “unlocking effect” resulting from a lowering of the federal capital gains tax to 15% in 2003.

A real estate lawyer for Greenberg Traurig, Robert Ivanhoe, said the gross dollar volume of real estate transactions has skyrocketed in recent years, and the volume of transactions have also increased, but at a slower pace. He said that those transactions are partially driven by the lower federal capital gains rate, which encourages more sellers to pay the capital gains tax instead of looking for a deferment vehicle.

Mr. Ivanhoe said that sellers are also encouraged to sell because of the removal of some “penal” taxes, like the Cuomo tax, the 10% surtax on capital gains for real estate transactions more than $1 million in New York State that was repealed in 1996.

“Certainly people when they sell, they look at what they will get after taxes,” Mr. Ivanhoe said. “They are more inclined to sell now, because the taxes on the sale are lower, from the absence of the Cuomo tax and the lowering of the capital gains tax.”

The percentage increase in capital gains realizations has spiked in recent years, but that does not directly translate into a windfall of revenues. City tax officials said that between 2002 and 2004, the last full tax year on record, capital gains realizations have increased about 270%, or at an annual increase of about $285 million in tax revenues, a fraction of the city’s budget. The city’s total expected revenue from taxes in 2005 is more than $36 billion.

While the city taxes reported capital gains at 3.6%, more tax revenue is generated at the state and federal level, where capital gains are taxed at 6.85% and 15% respectively. Capital gains tax only applies to some real estate transactions, and an individual can exclude up to $250,000, or $500,000 for a married couple, of gains on the sale of real property if the owner lived there for at least two years.

Both city and state tax officials said that a more important measure of the tax implications of the real estate market are receipts from the mortgage recording tax and the real property transfer tax. According to data provided by the city’s department of finance, city revenues from these taxes have grown to more than $2.3 billion in the fiscal year 2005, from less than $900 million in 2001.

A senior fellow at the Rockefeller Institute of Government, Donald Boyd, said that the capital gains receipts in rich states like New York are an important source of revenue, but he said the volatility based on market changes makes it difficult for governments to budget.

He said that after the Internet boom of the late 1990s, a lot of states, including New York, had budgeted for large capital gains revenues that never materialized, creating deficits. Receipts of capital gains revenues in New York State dropped about 50% between 2000 and 2001.

“Something so volatile can get you in a lot of trouble in you presume they are going to continue,” Mr. Boyd said.