What constitutes a mansion in New York City? For the past several decades, buyers of residential property in New York City have had to pay a surcharge of 1% on all sales for over $1 million; that surcharge is known as the “Mansion Tax.” At the time it was imposed, the name wasn’t as ridiculous as it is today, when in many parts of the city $1 million barely buys you a one-bedroom condominium. But this past weekend, the State Senate completely altered the structure of the surcharge, perhaps giving meaning to its name once again.
As part of the 2020 budget passed on March 31st, the New York State Senate and Assembly enacted new revenue legislation, which included an increase to New York State’s transfer tax and mansion tax on transfers of real property. The changes enacted will apply only to transfers in New York City and other cities with a population of 1 million or more. The changes described below apply to all transfers occurring after July 1, 2019. However, transfers made pursuant to a binding agreement entered into on or before April 1, 2019 (as confirmed by independent evidence such as a recording of the contract or a deposit), and closing after July 1, 2019, will not be subject to the increased taxes described below.
NYS Transfer Tax Change
NYS transfer tax before the change was $2 for every $500 (or fraction thereof) of consideration, subject to limited exceptions and exemptions. The new law levies an additional tax of $1.25 for each $500 (or portion thereof) of consideration on transfers of (i) residential property where consideration is more than $3 million and (ii) commercial property where consideration is more than $2 million. The chart below shows the applicable rates for a transfer in New York City (or other city with population over 1 million).
| Consideration Amount | NYS Transfer Tax Rate — Residential | NYS Transfer Tax Rate —Commercial |
| Under $2 million | .4% | .4% |
| $2 million ‒ $3 million | .4% | .65% |
| Over $3 million | .65% | .65% |
Mansion Tax Change
Before the enactment, the NYS mansion tax was imposed on transfers of residential real property with consideration over $1 million at the rate of 1 percent of the consideration paid. The new law increases this tax on a sliding scale for transfers where the consideration is in excess of $2 million, up to the highest tax rate of 3.9 percent on transfers with consideration in excess of $25 million. The chart below shows the applicable rates for a transfer in New York City (or another city with a population over 1 million).
| Consideration Amount | Total NYS Mansion Tax Rate |
| Under $1 million | Not subject to tax |
| At least $1 million, but less than $2 million | 1% |
| At least $2 million, but less than $3 million | 1.25% |
| At least $3 million, but less than $5 million | 1.5% |
| At least $5 million, but less than $10 million | 2.25% |
| At least $10 million, but less than $15 million | 3.25% |
| At least $15 million, but less than $20 million | 3.5% |
| At least $20 million, but less than $25 million | 3.75% |
| More than $25 million | 3.9% |
To simplify all of this information, the following is a calculator that lays out the Old Taxes and New Taxes.
CALCULATOR
https://kebuhcah.herokuapp.com/tax_calculator/#
We are happy to help with any questions. Call us any time.
Recent Comments