Recent New York City mansion tax changes may have you wondering how your home purchase will be affected. Your best resource is your real estate agent, but here are a few answers to commonly asked questions.
What is mansion tax?
Mansion tax is a one-time fee on the purchase of a New York City condo, co-op or townhouse sold for $1 million or more, paid by the buyer. The name may be misleading as $1 million hardly buys you a one-bedroom in Manhattan these days, not a mansion, but the tax has been in effect since 1989.
How much is mansion tax?
Historically, mansion tax was equal to 1% of the sale price of a property. But, effective July 1, 2019 mansion tax is now on a progressive rate scale from 1% for homes from $1 million–$1.99 million, up to 3.9% for homes $25 million and above (see the detailed chart below for all eight tax brackets).
New York City Mansion Tax Rates as of July 1, 2019
How will the recent NYC mansion tax changes affect my home search and purchase?
Higher mansion tax rates mean higher closing costs for buyers than before these changes came into effect. For example, mansion tax due on a $5 million property used to be $50,000, and now it’s more than double that at $112,500. And the higher the purchase price, the more a buyer will pay in additional mansion tax.
The best thing you can do is inform yourself of which mansion tax bracket your property will fall into. Use the chart above as a starting point. Do your calculations to determine how much mansion tax you will owe at closing so there are no surprises.