The NYC mansion tax is a residential real estate transfer tax imposed on property purchases with a price over a specified dollar amount, and for most New Yorkers the mansion tax is one of the biggest potential closing costs when buying a condo, co-op, or residential home.
If you are planning to buy an apartment in New York City, we’ve outlined below what you need to know:
You plan to buy a real estate in New York : understand the History of the Mansion Tax NYC
The mansion tax NYC was originally proposed by the administration of then New York Governor Mario Cuomo. In 1989, the intention of this was to improve New York state’s budget during a tough economic period.
At the moment, taxing properties costing more than $1,000,000, placed the economic burden on a small group of high-earning, rich New Yorkers who were seen as being able to afford it.
How does the mansion tax NYC work?
Anyone who purchased any piece of real estate for $1 million or more in NYC is subject to the mansion tax NYC. The tax rate is a simple percentage of the purchase price. For instance, if you buy an apartment for $1.5 million, you would have to pay $15,000.
Since the mansion tax NYC is paid on the entire value of the property, the difference between buying an apartment for $999,999 and buying another for $1 million is significant. That single dollar more actually costs the buyer $10,001. Hence, there are very few real estate closings at just over $1 million.
Who Pays the Mansion Tax NYC?
Assuming you purchase residential real estate in New York City, you pay the mansion tax NYC on the sale and it’s due within 15 days of closing. It should be accounted for in your estimated closing costs. Although that 1% may not seem like a lot, if you’re financing the purchase, it represents a big portion of your total cash investment.
According to the law that created the mansion tax, it’s due on the purchase of any premises that is or may be utilized in whole or in part as a personal residence, and shall include a one, two, or three-family house, an individual condominium unit, or a cooperative apartment unit.
How much is the mansion tax?
Assuming your purchase price is equivalent to or greater than 1 million dollars, you will be required to pay an extra tax on your purchase. The percentage of that tax will now vary based on your purchase price.
The NYC mansion tax condo buyers pay is the same as the NYC mansion tax co-op buyers pay, assuming the same purchase prices for the two apartments.
What Are The Mansion Tax NYC Rates?
The mansion tax NYC rates are as follows:
1.00% for purchases between $1,000,000 to $1,999,999
1.25% for purchases between $2,000,000 to $2,999,999
1.50% for purchases between $3,000,000 to $4,999,999
2.25% for purchases between $5,000,000 to $9,999,999
3.25% for purchases between $10,000,000 to $14,999,999
3.50% for purchases between $15,000,000 to $19,999,999
3.75% for purchases between $20,000,000 to $24,999,999
3.90% for purchases between $25,000,000 or greater
It’s important to incorporate the mansion tax at the correct rate based on your purchase price. This is especially necessary when you’re estimating how much you need to make the purchase, or when your real estate attorney calculates your closing costs.
When do you pay and file the required forms for mansion?
For purpose of straightforwardness, if your real property or co-op apartment is subject to the tax, you should expect paying at closing. The necessary filings are then typically submitted by the title company post closing if you are purchasing a condo, house, or townhouse in NYC. If you are purchasing a co-op, your real estate attorney will organize the submission.
How can you avoid the NYC mansion tax and other closing costs?
Unfortunately, you can’t avoid paying this tax. However, you can reduce your mansion tax bill and closing costs in NYC and give yourself an advantage by utilizing a cost-saving strategy called the buyer commission rebate which allows you to get a cash back from your real estate broker.
The Future of Mansion Tax NYC Law
Time is changing faster than anticipated and for many average New Yorkers, it’s hard to associate the term “mansion” with this tax when they are likely purchasing a little more than a one-bedroom while just crossing over the $1,000,000 price threshold for the initial 1% tax.
Recently, there has been growing debate around what will constitute a mansion tax in the future. The recent action by New York State at the end of March 2019, creating a graduated system of mansion tax rates, is the first significant change in decades. It is likely to remain an ongoing topic of discussion among politicians as they consider the ramifications on housing affordability and future state budgets.
Damalion experts helps you identify the apartment of your dream in New York thanks to our network of real estate agents. In addition, our experts guide you about legal and tax aspects for your future New York property. Contact your expert now to have independent answers.
