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NYC Mansion Tax of 1%

The Mansion Tax in NYC is a 1% tax paid by buyers on the purchase of real estate priced at $1 million or more. The Mansion Tax is the largest component of buyer closing costs in NYC which are approximately 4% for condos and houses and 2% for co-op apartments.

The Mansion Tax is just one component of the Real Estate Transfer Tax levied by New York State on the sale of real estate. Since the Mansion Tax is customarily paid by buyers while the normal transfer taxes are paid by sellers, the Mansion Tax is not usually referred to as a Transfer Tax in New York City.

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How Much Is the Mansion Tax in NYC?

The Mansion Tax in NYC is 1% of the purchase price. The amount of the Mansion Tax is outlined in New York Tax Law (Article 31), Section 1402-A.

The Mansion Tax itself only applies to sales of $1 million or more, and the threshold hasn’t been adjusted for inflation in over 30 years. Therefore, the Mansion Tax is increasingly applying to the sale of relatively small apartments in NYC.

It’s very common to find listings in NYC priced just below $1 million because of the Mansion Tax. Many sellers hope that by initially pricing below $1 million they can generate a large amount of demand, multiple offers and ultimately push the sale price above $1 million.

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How to Avoid the NYC Mansion Tax

The easiest way to avoid paying the Mansion Tax in NYC is to request a Hauseit® Buyer Closing Credit. While this strategy won’t technically absolve you from paying the tax, the savings you’ll pocket from the closing credit will usually cover your Mansion Tax bill and leave you with money to spare.

Another way to avoid the Mansion Tax as a buyer in NYC is to ask the seller to pay it. However, you’ll want to keep in mind that the only way a seller will agree to this is if you as the buyer have some serious leverage. If you find yourself in a bidding war or a property has only been on the market for a few months, there is virtually no chance the seller will take your request seriously.

On the other hand, it’s not impossible for the seller to pay the Mansion Tax if you’re thinking of buying into a new development which is falling behind on its sale targets. Similarly, there’s a chance a seller will pay the Mansion Tax if their listing has been on the market for more than 6 months and/or the apartment has serious marketability issues caused by property condition, a poor layout, unrealistic pricing or poor advertising exposure.

The final way to avoid the Mansion Tax is to cap your search below $1 million. If you’re open to renovating, you could look for a property which is priced below $1 million simply because it needs a gut renovation.

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Mansion Tax vs. Transfer Tax in NYC

The key difference between the Mansion Tax and regular Transfer Taxes is that buyers pay the former and sellers pay the latter. In other words, buyers pay the Mansion Tax and sellers pay the NYC and NYS Transfer Taxes.

NYC & NYS Transfer Taxes are 1.4% or sales of $500k or less and 1.825% for sales over $500k. The NYS component of seller Transfer Taxes is a fixed 0.4% regardless of the sale price. Therefore, the NYC Transfer Tax rates are 1% for sales of $500k or less and 1.425% for sales above $500k.

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How Much Are Buyer Closing Costs in NYC

Buyer closing costs in NYC are roughly 4% for condos and houses and 2% for coop apartments. Closing costs are higher for condos and houses if you’re financing because the Mortgage Recording Tax of 2.05% to 2.175% does not apply to co-op apartments.

Another reason why buyer closing costs are higher for condos and houses is the fact that you need to purchase Title Insurance. Co-op apartments are not technically considered Real Property which means they don’t come with a traditional deed like for condos, houses and land. The fact that there is no deed and chain of title means that it’s not necessary to purchase Title Insurance when buying a co-op apartment.

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What Is New York Tax Law Article 1402-A?

New York Tax Law Article 1402-A contains the Mansion Tax provision. Therefore, anyone who mentions ‘1402A’ is simply referring to the Mansion Tax.

The language of New York State Tax Law § 1402-A (2015) is as follows:

1402-a. Additional tax. (a) In addition to the tax imposed by section fourteen hundred two of this article, a tax is hereby imposed on each conveyance of residential real property or interest therein when the consideration for the entire conveyance is one million dollars or more. For purposes of this section, residential real property shall include any premises that is or may be used 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.  The rate of such tax shall be one percent of the consideration or part thereof attributable to the residential real property. Such tax shall be paid at the same time and in the same manner as the tax imposed by section fourteen hundred two of this article.

(b) Notwithstanding the provisions of subdivision (a) of section fourteen hundred four of this article, the additional tax imposed by this section shall be paid by the grantee.  If the grantee is exempt from such tax, the grantor shall have the duty to pay the tax.

(c) Except as otherwise provided in this section, all the  provisions of  this  article  relating  to  or  applicable  to  the administration, collection, determination and distribution of the tax imposed by section fourteen hundred two of this article shall  apply  to  the  tax  imposed under  the  authority  of this section with such modifications as may be necessary to adopt such  language  to  the  tax  so authorized. Such provisions shall apply with the same force and effect as if those provisions had been set forth in this section except to the extent that any provision is either inconsistent with a provision of this section or not relevant to the tax authorized by this section.

Save 2% on Your Home Purchase

Save money without disrupting your deal by working with one of our traditional, experienced partner buyer's brokers who never openly discount. Discreet buyer closing credit check given at close.

Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).

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