New York City's Mansion Tax
There is a 1% tax on the sale of homes that cost $1 million or higher. This tax is normally paid by the buyer within 15 days of closing. In practice, this means if you purchase a condominium for $2 million, you will owe a tax of $25,000, payable two weeks after closing.
Why Is There a Mansion Tax?
Governor Mario Cuomo enacted the mansion tax in 1989 to bolster the New York State budget. At the time, there was an economic recession, so this tax was aimed at people who could afford to pay it. This has become an outdated idea in 2016, as the median sale price of property in Manhattan is $1.22 million, and this tax affects middle-class New Yorkers quite harshly. The idea of a mansion tax was meant for the rich, buying an 8,000 square foot apartment in Trump Towers or someplace like that. Today, this tax is just as often assessed on an 800 square foot one bedroom that a small family is already struggling to afford.
The Future of the Mansion Tax
Mayor Bill de Blasio has proposed two reforms to the mansion tax: he has proposed bumping the limit up to homes that cost over $1.75 million, and increasing the tax to 1.5% on home sales over $5 million. The mayor’s proposal could generate an additional $200 million per year in tax revenue and has the support of the Real Estate Board of New York. If passed, it will apply to almost 10% of all real estate deals citywide and over 24% of the real estate deals in Manhattan. This is a change that needs to happen in Albany, however, by state lawmakers.
If you would like to further discuss the mansion tax or have any other questions about New York real estate and the tax consequences of buying or selling real property in New York City, contact the Mehra Law Group today at (718) 347-6800.