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
South Harlem
3 West 122nd Street
$690,000
2 |
1
Battery Park City
225 Rector Place
$925,000
1 |
1
Sutton Place
347 East 53rd Street
$699,000
1 |
1
Kips Bay
311 East 25th Street
$475,000
2 |
1
East Harlem
353 E. 104th Street
$975,000
3 |
2
Hell’s Kitchen
300 West 53rd Street
$745,000
1 |
1
Lenox Hill
300 East 74th Street
$999,000
1 |
1.5
Hell’s Kitchen
333 West 57th Street
$895,000
1 |
1
Beekman
10 Mitchell Place
$585,000
1 |
1
Lincoln Square
220 Riverside Boulevard
$925,000
1 |
1
East Harlem
353 E. 104th Street
$790,000
2 |
2
Hell’s Kitchen
310 West 55th Street
$650,000
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
New Lots
240 Cozine Avenue
$425,000
2 |
1
Coney Island
458 Neptune Avenue
$415,000
2 |
1
Old Mill Basin
2021 East 61st Street
$879,000
3 |
1.5
Gerritsen Beach
19 Nova Court
$799,000
3 |
2.5
Coney Island
2717 West 16th Street
$980,000
4 |
2
Clinton Hill
325 Clinton Avenue
$849,000
1 |
1
Canarsie
1181 East 84th Street
$970,000
4 |
3
Flatbush
1462 Flatbush Avenue
$499,000
1 |
1
Bay Ridge
474 Bay Ridge Avenue
$999,000
5 |
7
Prospect Lefferts Gardens
406 Fenimore Street
$575,000
1 |
1
Homecrest
2503 Ocean Avenue
$608,000
2 |
2
Greenwood
179 20th Street
$875,000
1 |
1
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
Woodside
51-34 30th Avenue
$649,000
3 |
1
Glendale
69-28 Woodhaven Boulevard
$899,000
3 |
1
Jackson Heights
35-34 84th Street
$517,000
2 |
1
Hunters Point
21-19 46th Avenue
$950,000
1 |
1
Elmhurst
42-25 80th Street
$498,000
1 |
1
Forest Hills
106-20 70th Avenue
$498,000
Studio |
1
Forest Hills
69-40 Yellowstone Boulevard
$469,000
2 |
1
Elmhurst
46-06 88th Street
$597,999
2 |
1
Rego Park
65-36 Wetherole Street
$465,000
1 |
1
Beechhurst
166-25 Powells Cove Boulevard
$529,000
1 |
1
Auburndale
46-35 190th Street
$960,000
3 |
1.5
Murray Hill (Queens)
145-38 34th Avenue
$696,000
2 |
2
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!