What is NYC's Mansion Tax?
- By Diane Tuman June 12, 2015
Among the many oddities, anomalies and carryovers in New York City’s real estate landscape is something called the “mansion tax.”
The mansion tax is a 1 percent tax on sales of homes $1 million and more and is customarily paid by the buyer within 15 days of the closing. So, if a condo sells for $1.25M, the buyer pays a tax of $12,500.
Started in 1989 by Governor Mario Cuomo, the tax was intended to bolster New York State’s budget during an economic recession and was aimed at people who could probably afford to pay it: buyers of million-dollar homes.
Nearly 27 years later, the idea of a “mansion tax” on a property that costs $1 million has become outdated. Since the median sales price in Manhattan is now $1.22M, the mansion tax is now affecting more people who are regarded as middle class rather than so-called millionaires snatching up mansions. And the types of “mansions” at $1 million are often not spacious townhouses, but rather 700-sq ft apartments with one or two bedrooms, which is another amusing twist to ill-named mansion tax.
What is the future for the mansion tax?
New York City Mayor Bill de Blasio is proposing two reforms to the mansion tax to address the city’s growing need for affordable housing.
- Bump up the 1 percent mansion tax to sales of NYC homes valued at $1.75 million or more
- Increase the mansion tax to 1.5 percent tax on sales over $5 million
But, the plan needs approval by lawmakers in Albany, which is unlikely to happen in this legislative session. Gov. Andrew Cuomo proposes to extend 421a for the time being, because it’s a “complicated beast” and he doesn’t want to rush into it.
De Blasio’s plan is said to potentially generate $200 million a year in tax revenue, which would be dedicated to funding the city’s affordable housing programs and he estimates this money “… could build 37,000 affordable apartments over the next decade – enough housing for more than 95,000 New Yorkers.”
De Blasio’s new tax proposal, which has the support of the Real Estate Board of New York (REBNY), would apply to approximately 10 percent of real estate deals citywide and more than a quarter of sales in Manhattan.
And, while it is called a “tax,” it is not deductible.