New York City’s mansion tax is a real estate tax applied to the purchase of property that costs more than a specified dollar amount. When purchasing a home, condo, or co-op in New York, the mansion tax is the most expensive closing cost.
Anyone planning to buy a home in New York City should understand how the mansion tax can affect the sale.
Property and the Mansion Tax
Any residential property that costs less than $1,000,000 isn’t subject to the mansion tax. The mansion tax threshold is $1,000,000 or higher. So even if the property isn’t a mansion, any residential property that costs at least $1,000,000 is subject to the mansion tax.
How Much is the Mansion Tax?
The real estate buyer is required to pay the mansion tax as part of the closing cost. The tax amount depends on the purchase price of the real estate.
As of 2019, the mansion tax rates are as follows:
- 1 percent tax for residential property costing $1,000,000 to $1,999,999
- 1.25 percent tax for residential property costing $2,000,000 to $2,999,999
- 1.50 percent tax for residential property costing $3,000,000 to $4,999,999
- 2.25 percent tax for residential property costing $5,000,000 to $9,999,999
- 3.25 percent tax for residential property costing $10,000,000 to $14,999,999
- 3.50 percent tax for residential property costing $15,000,000 to $19,999,999
- 3.75 percent tax for residential property costing $20,000,000 to $24,999,999
- 3.90 percent tax for residential property costing $25,000,000 or more
Planning for Closing Costs
Anyone planning to buy a residential property in NYC must determine if they’ll pay a mansion tax. If so, they must then make sure to have enough money to cover the expense.
Purchasing a residential property that costs $2,500,000 will result in a $31,250 mansion tax. And there are also other closing costs to consider.
There is a growing debate concerning the fairness of NYC’s mansion tax. With the astronomical rise in NYC real estate prices, some buyers are scared away by the additional expense of the mansion tax.
In the past, it was believed that only wealthy buyers would have to deal with the additional tax. But not all real estate buyers are wealthy. There is a concern that the addition of the mansion tax will potentially make it impossible for non-wealthy residents to buy residential real estate. There is also a concern that real estate buyers who aren’t full time NYC residents will balk at paying the tax.