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
Lincoln Square
155 West 68th Street
$699,000
Studio |
1
Lincoln Square
155 West 68th Street
$660,000
Studio |
1
Lower East Side
530 Grand Street
$875,000
2 |
1
Murray Hill
137 East 36th Street
$499,000
1 |
1
Lenox Hill
233 East 70th Street
$469,000
Studio |
1
Lincoln Square
140 West 69th Street
$699,000
1 |
1
Greenwich Village
23 Waverly Place
$575,000
Studio |
1
Hamilton Heights
505 West 143rd Street
$460,000
2 |
1
Central Harlem
231 West 148th Street
$634,800
2 |
1
Central Harlem
2351 Adam Clayton Powell Jr Boulevard
$890,000
2 |
2
Murray Hill
5 Tudor City Place
$585,000
1 |
1
Greenwich Village
50 East Eighth Street
$599,000
1 |
1
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
Sheepshead Bay
2803 Batchelder Street
$649,000
3 |
2.5
Park Slope
514 9th Street
$795,000
2 |
1
East New York
576 Barbey Street
$649,999
3 |
2
Boerum Hill
120 Bergen Street
$850,000
2 |
1
Cypress Hills
229 Nichols Avenue
$890,000
7 |
3
Brownsville
1108 Willmohr Street
$895,000
5 |
3.5
Coney Island
601 Surf Avenue
$599,000
2 |
1
Brighton Beach
2948 Brighton 4th Street
$629,000
2 |
1
Brighton Beach
2948 Brighton 4th Street
$429,000
1 |
1
Downtown Brooklyn
319 Schermerhorn Street
$585,000
Studio |
1
Sheepshead Bay
3107 Emmons Avenue
$760,000
3 |
3
Sheepshead Bay
2801 East 28th Street
$579,000
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
Astoria
25-40 Shore Boulevard
$739,000
1 |
1
Sunnyside
43-33 42nd Street
$499,000
1 |
1
Oakland Gardens
216-15 68th Avenue
$450,000
3 |
1
Maspeth
54-05 68th Street
$928,000
4 |
3
Jackson Heights
35-25 77th Street
$459,000
1 |
1
Hunters Point
22-43 Jackson Avenue
$999,000
1 |
1
Kew Gardens
132-43 Metropolitan Avenue
$630,000
2 |
2
Flushing
138-12 Northern Boulevard
$658,000
1 |
1
Hunters Point
2-40 51st Avenue
$895,000
1 |
1
Woodhaven
80-49 88th Avenue
$799,000
3 |
2
Forest Hills
67-38 108th Street
$420,000
2 |
1
Astoria
12-15 Broadway
$499,000
Studio |
1
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!