Q: What is the New York Mansion Tax?
The definition of a mansion : Middle English, from Anglo-French, from Latin mansion-, mansio, from manēre to remain, dwell; akin to Greek menein to remain First Known Use: 14th century. Abode, A large imposing residence, large structure, stately, chateau, estate, manor, villa.
A: Any one familiar with Manhattan real estate knows the definition of a mansion has nothing to do with the NY Mansion Tax. In Manhattan, the mansion tax is a state tax that is payable by the buyer for transactions of properties priced $1,000,000 or more.
The mansion tax is 1% of the purchase price for properties $1M or more. City and state transfer taxes are paid by sellers. However, many "sponsors" in new developments have buyers pay transfer taxes.
NYC transfer tax is 1.425% of price over $500,000 and New York State Transfer Tax is $2.00 per $500.00 of sales price. Therefore a buyer in a new development that is paying transfer taxes will have to pay the mansion tax if the purchase price is around $980,000 or higher. Transfer taxes are considered part of the purchase price if paid by the buyer.
The mansion tax has been in place since 1989. It was instituted by Governor Mario Cuomo, the father of current Governor Andrew Cuomo. It was a surcharge for the wealthy. The current Governor has pledged not to raise taxes, perhaps he will do away with the mansion tax but I won't hold my breath.
Back in 1989 it may have been possible for a buyer to actually purchase a mansion in NY for a million dollars.
Today $1 million is below the average price of a Manhattan apartment.
The mansion tax is 1% of the purchase price or 1% of the purchase price + transfer taxes. No other closing costs are considered part of the purchase price.
The mansion tax can be used to lower the basis when reselling to reduce capital gains.
In a resale the seller pays the transfer tax. The transfer tax portion of the mansion tax is only imposed on buyers that buy a sponsor unit in new construction or a conversion. A sponsor imposed transfer tax is negotiable. Savvy buyers and those represented by a good buyer's agent rarely pay the sponsor's taxes.
While the mansion tax is the burden of the buyer it can be negotiated like everything in real estate.