NYC Mansion Tax – Key Facts Buyers Need to Know in 2019

The NYC mansion tax is a 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 largest potential closing costs when buying a condo, co-op, or residential home.

If you are planning to buy an apartment or home in NYC, below we’ve outlined what you need to know.

Key questions to ask about the mansion tax in New York City

  • What properties are subject to the mansion tax law?
  • How much this additional tax will contribute to your closing costs if applicable?
  • How you can offset these taxes and closing costs with the cost-saving strategy of a buyer commission rebate?
  • When do you pay and file the required forms for mansion tax?
  • What is the history and future of the mansion tax law?

 

Mansion Tax NYC Luxury Apartment
Soho Loft in NYC

When is a residential property purchase subject to the mansion tax in NYC?

While you may not exactly feel like you are buying a “mansion” when you are buying a condo, co-op or home in NYC, the price threshold for the real estate transfer tax (commonly referred to as the NYC mansion tax) is $1,000,000. This only applies to properties purchased for that amount or more so if you did buy something for $999,999.99, you owe nothing. A penny more and you will be subject to the mansion tax, and it is paid for by you the buyer at the time of closing. 

How much is the mansion tax?

If your purchase price is equal to or greater than $1,000,000 (1 million dollars), you will be required to pay 1% of the purchase price in additional taxes.

When you are estimating how much you will need to purchase an apartment or home in NYC or when your real estate attorney is calculating your closings costs in preparation of your transaction, it is important to include the mansion tax NYC buyers pay (if required) in your calculations.  For example, if you are purchasing a condo or co-op for $1,500,000, you will have to pay a NYC mansion tax of $15,000 in addition to all of the other closing costs associated with your purchase.

NYC Mansion Tax (Based on $1,500,000 purchase price)

  • Purchase Price: $1,500,000
  • Down Payment: $300,000
  • NYC Mansion Tax (1%): $15,000 

How can you offset the NYC mansion tax and other closing costs?

While it may feel unfair to be hit with burdensome taxes and fees when only buying a one or two bedroom apartment, you can’t avoid paying this tax. However, you can help offset your mansion tax bill and closing costs in NYC and give yourself an advantage with the cost-saving strategy of a buyer commission rebate.

Receiving a commission rebate allows you to get cash back from your real estate broker. At Prevu, we are a technology-driven, full-service brokerage that passes a significant rebate along to our customers.

With Prevu’s Smart Buyer™ Rebate, you receive two-thirds of the commission Prevu receives for representing you as a buyer's broker. For example, if you buy a $2,000,000 condo or co-op with a 6% commission (3% paid to seller’s broker and 3% to the buyer’s broker), your commission rebate totals 2% of the purchase price. That’s a savings of $40,000 that you can use to offset all of your $20,000 mansion tax and then some.

To estimate your potential closing costs and see if you'll have to pay mansion tax, check out Prevu's NYC closing costs calculator for buyers.

When do you pay and file the required forms for mansion tax?

As discussed earlier, the mansion tax is a real estate transfer tax, and as a result the applicable taxes will be submitted along with a Form TP-584 in the State of New York. For sake of simplicity, if your property is subject to the tax, you should anticipate 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 coordinate the submission.

What is the history of the mansion tax? 

In 1989, the mansion tax was originally proposed by the administration of then New York State Governor Mario Cuomo (the father of current Governor Andrew Cuomo). The intention of this and other taxes levied in the law that finally passed was to improve New York State's budget during a difficult economic period. At the time, taxing properties costing more than $1,000,000 placed the economic burden on a small group of high-earning, wealthy New Yorkers who were perceived as being able to afford it. 

What is the future of mansion tax law?

Times have changed though! For many average New Yorkers, it's hard to associate the term "mansion" with this tax when they are likely buying little more than a one-bedroom when just crossing over the $1,000,000 price threshold for the 1% tax.

In recent years, there has been growing debate around what will constitute a mansion tax in the future. In 2015, Mayor Bill Di Blasio proposed the idea of reforming the mansion tax laws with the potential to raise the minimum price threshold subject to the tax and/or increase the mansion tax rate for a second, higher price threshold to be determined.

While no major mansion tax reform has occurred, it is likely to remain a topic of discussion among politicians as they consider the implications on housing affordability and future budgets.

 

As always, the Prevu Team is here to help if you have any questions. You can reach us at prevuteam@prevu.com or (646) 603-6868.

 

DISCLAIMER: This material was provided for informational purposes only, and is neither intended to provide, nor should be relied upon as tax, legal, or accounting advice. Prevu and its subsidiaries do not provide tax, legal, or accounting advice. You are encouraged to consult your personal tax, legal, or accounting professionals before considering any transaction as your individual situation may vary.

 

 

Categories: Buyer NYC Taxes