As Dolly Parton famously said, “It costs a lot of money to look this cheap.” Unfortunately, it costs a lot of money to look rich, too. Just ask anybody who has had to pay the NYC mansion tax — it is one of the most significant closing costs associated with buying an expensive home.
Table of Contents
Manhattan Homes Under $999K on StreetEasyArticle continues below
Lenox Hill
120 East 75th Street
$750,000
1 |
1
Fulton/Seaport
99 John Street
$650,000
Studio |
1
Hell’s Kitchen
408 West 57th Street
$520,000
Studio |
1
Lenox Hill
440 East 79th Street
$550,000
1 |
1
Lenox Hill
200 East 69th Street
$735,000
1 |
1
Central Park South
106 Central Park South
$950,000
1 |
1.5
Chelsea
200 West 20th Street
$500,000
Studio |
1
Lincoln Square
185 West End Avenue
$899,000
1 |
1
Central Harlem
370 Lenox Avenue
$625,000
1 |
1
Murray Hill
67 Park Avenue
$799,000
1 |
1.5
Inwood
100 Park Terrace West
$450,000
1 |
1
Hamilton Heights
523 West 143rd Street
$650,000
3 |
1.5
When Was the Mansion Tax Introduced?
Created in 1989 by Governor Mario Cuomo, New York’s original mansion tax was a flat, 1% tax on statewide homes sales of $1 million or more. For example, back then, if a house, co-op, or condo sold for $1.25 million, the buyer would have paid a tax of $12,500. Sure, that seems like chump change compared to the purchase price. But if you do the math, it’s like treating yourself to a dollar bagel every single morning for — wait for it — four years. That’s a lot of bagels!
In 2019, the mansion tax was increased with a supplemental tax — but only for homes in New York City — as a funding mechanism for upgrading MTA subways.
“First-time NYC home buyers are usually surprised by the mansion tax. So it’s important for agents to educate buyers when discussing the buyer’s ‘price range’ in their real estate search,” says Kimberly T. Hastie, a licensed associate real estate salesperson at Brown Harris Stevens Residential Sales. “Best to identify this upfront to avoid last-minute surprises!”
Brooklyn Homes Under $999K on StreetEasyArticle continues below
Fort Hamilton
9718 Fort Hamiltn Parkway
$886,000
2 |
2
Midwood
852 East Seventh Street
$900,000
3 |
2
Homecrest
1834 East 26th Street
$939,000
2 |
1
Coney Island
464 Neptune Avenue
$450,000
2 |
1
Bergen Beach
2452 East 74th Street
$899,000
4 |
3.5
East Flatbush
230 East 42nd Street
$749,999
4 |
2
Brighton Beach
40 Oceana Drive
$779,000
2 |
2
Stuyvesant Heights
28 Dewey Place
$849,000
Studio |
2
Flatlands
1358 East 57th Street
$749,000
2 |
2.5
New Lots
989 Schenck Avenue
$578,000
3 |
1.5
Marine Park
1817 East 37th Street
$778,000
3 |
1.5
Borough Park
1238 63rd Street
$858,000
2 |
2
How Much Is the Mansion Tax in NYC?
If you have to ask, you can’t afford it. (Kidding!) Buyers of personal residences pay a statewide mansion tax of 1% for property purchased for $1 million or more. However, for properties in New York City, a new, additional supplemental tax on the mansion tax applies to the buyer. This extra tax rate will rise incrementally with residential real estate properties with purchase prices of $2 million or more, capping out at a total of 3.90% for properties sold at $25 million or above. That’s a lot of Benjamins.
Here’s some math
Let’s say you decide to treat yourself to a $7,000,000 condo in Tribeca. The supplemental tax rate due is 1.25% (a whopping $87,500), in addition to a 1% mansion tax of $70,000. Refer to this handy chart below.
Purchase Price
Mansion Tax
Less than $999,999
0.00%
$1,000,000 – $1,999,999
1.00%
$2,000,000 – $2,999,999
1.25%
$3,000,000 – $4,999,999
1.50%
$5,000,000 – $9,999,999
2.25%
$10,000,000 – $14,999,999
3.25%
$15,000,000 – $19,999,999
3.50%
$20,000,000 – $24,999,999
3.75%
$25,000,000 or more
3.90%
Who Pays the Mansion Tax in New York?
The buyer customarily pays the NYC mansion tax within 15 days of closing on the home. However, if a buyer doesn’t pay or is exempt, the seller must cover it according to the Department of Taxation and Finance. Why? If a buyer failed to pony up, the mansion tax becomes a joint responsibility, or in legalese, a several liability of the seller and buyer — sort of like having a roommate on the tax debt.
Queens Homes Under $999K on StreetEasyArticle continues below
Flushing
41-05 College Point Boulevard
$668,000
2 |
2
Jackson Heights
35-35 75th Street
$425,000
1 |
1
St. Albans
188-23 Mangin Avenue
$669,000
4 |
3
Forest Hills
102-55 67 Drive
$510,000
2 |
2
Forest Hills
110-45 Qns Boulevard
$535,000
2 |
1
Hunters Point
2-17 51st Avenue
$895,000
1 |
1
Ridgewood
1624 Jefferson Avenue
$975,000
3 |
2
Ridgewood
1624 Jefferson Avenue
$995,000
3 |
3
Glendale
71-53 69th Street
$999,999
6 |
2
Forest Hills
110-07 73 Road
$795,000
2 |
1
Woodhaven
74-01 Rockaway Boulevard
$829,999
Studio |
1
Rego Park
74-45 Yellowstone Boulevard
$425,000
2 |
1.5
Does the Mansion Tax Affect Co-ops, Condos, and Townhouses?
Yes. The mansion tax affects all residential property in New York, including condos, co-ops, and townhouses or brownstones. Mixed-use properties, such as a unit above a retail shop, also counts.
How Is the Mansion Tax Affecting the NYC Real Estate Market?
Nope. While the mansion tax is called a “tax,” it is not deductible. “Mansion tax is not deductible on the federal tax return, but it does increase the tax basis of your property,” says Xintian Wang, CPA, a manager at Dimov Tax Specialists. “The increase in the tax basis will ultimately reduce the capital gains you will have when you sell the property.” So, you may see a little boost on the back end when you go to sell.
And don’t forget another perk. If you have to pay the mansion tax, even if you bought a $1.1 million studio (it happens), you get to tell all your friends you just bought a mansion. Heyo!