How Much is the Mansion Tax in NYC Real Estate?

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In this video, we will demystify the topic of the Mansion Tax in New York City real estate. I'm Nick from Hauseit, New York City's largest For Sale by Owner and Buyer Closing Credit Company. Thanks for watching. The Mansion Tax in New York City is one of the largest buyer closing costs faced by home purchasers in the city.

Specifically, the tax applies to purchases where the total consideration is $1 million or more. Therefore if you're buying an apartment or a house that is $800k or $900k, the tax does not apply. The original tax was a fixed 1% tax rate on the entire purchase amount, again for properties of $1 million or more.

In an attempt to raise revenue, the government of New York recently revamped and raised the Mansion Tax in 2019. The changes they made morphed the tax away from a fixed 1% amount to a more progressive tax structure which raises the tax based on the purchase price as you move closer to $25 million.

The original 1 % Mansion Tax rate still applies to purchases of $1 million or more and less than $2 million. However once you hit the $2 million threshold the Mansion Tax increases up to 1.25%. Similarly once you hit the $3 million threshold, the tax increments up further to 1.5%. To view all of the Mansion Tax brackets in NYC, visit this page: https://www.hauseit.com/nyc-mansion-tax/

Now, many buyers ask: Is the Mansion Tax negotiable? Can I get the seller to pay for it? And it's a very good question because the answer really comes down to the fact that pretty much everything in a New York City real estate transaction is negotiable, but your request for a concession on the side of the seller has to make sense in the context of the other demand and expressions of interest that a seller may be facing and receiving. If a property has numerous offers and open houses are well trafficked, it is highly unlikely if not downright offensive to think that the seller may cover the Mansion Tax.

Conversely, if you are buying a very expensive new construction condo in Hudson Yards it is possible that through the course of a negotiation with the developer they may be willing to cover some or all of your Mansion Tax and perhaps other closing costs specifically related to new developments but we'll discuss that in another video.

Another common question buyers ask us regarding the Mansion Tax is whether or not it is tax deductible. Now the Mansion Tax is not deductible in the year of your purchase. However, as with any of your other buyer closing costs it is added to the capitalized cost of the asset and therefore helps you reduce any capital gains tax you may owe when you sell the property.

Another interesting quirk of the Mansion Tax in New York City is that it is based on the total consideration of your purchase. Even if your purchase price is technically below $1 million.

You may still have to pay the Mansion Tax if you agree to pay for example the sponsor or the sellers transfer taxes because that would make the total consideration go above the $1 million threshold. Many savvy buyers try to devise ways to avoid the Mansion Tax, and another commonly suggested method is to purchase the furniture in an apartment separately in order to lower the purchase price below the $1 million threshold.

If you embark upon this strategy, you will need to pay sales tax on that furniture separately as part of your annual tax return filing. It's also important to ensure that you are not deliberately trying to structure a transaction in order to evade the Mansion Tax or any other tax levied by the city or the state as that could land you in legal hot water. We always suggest that you speak with an attorney, an accountant and a tax advisor when it comes to any strategies you may be considering for mitigating closing costs on a purchase.

We hope that was helpful and thank you for watching. Feel free to subscribe below if you are interested in watching more of our content.

Mansion Tax Rates in NYC: https://www.hauseit.com/nyc-mansion-tax/
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Hauseit LLC, Licensed Real Estate Broker
Tel: (888) 494-8258 | https://www.hauseit.com
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