LIVING IN NEW YORK CITY—A PRIVILEGE?

Living in one of the most desirable cities, New York City, is increasingly becoming more of a privilege and access to this privilege requires homeowners to pay BIG TIME—in the BIG APPLE. Known for its skyscrapers and for its rapid rise in newly built developments, NYC residents are accustomed to being surrounded by high rises. However, it is not just New York City buildings that are rising high. Taxes imposed on purchasers and sellers are moving in the same direction and are set to get a lot higher, especially for luxury properties where some purchasers will pay almost four times as much in Mansion Tax.

On March 31, 2019, thirty years after the original Mansion Tax went into effect in 1989, the New York State legislative body passed legislation raising those taxes. Effective July 1, 2019 the New York State Mansion Tax paid by purchasers will move from a fixed 1% for all homes over one million dollars ($1 million) to a new 8-tiered system ranging from 1% for purchases between $1 million and $2 million to as high as 3.9% percent for homes over $25 million. This increase in Mansion tax affects only properties located within New York City, while purchasers of properties outside the City will continue to pay only one percent 1% for purchases of $1 million or more.

With the median sales price of Manhattan condos and co-ops consistently being over one million dollars ($1million), half of all purchasers in Manhattan regularly paid the 1% Mansion Taxes; however, going forward those whose purchase is $2 million or more will be in a higher tax tier, requiring them to dig deeper in their pockets.

Still, it is not only the purchasers who will have to pay more, as sellers have been gifted the same fate. Nonetheless, the increase of the State Transfer Tax was way less volatile than the changes in Mansion Tax. Transfer Tax paid by sellers will raise from 0.4% to 0.65% for homes over $3million and commercial property purchases over $2million.

Although Mansion Tax is only paid to the State, Transfer Tax must be paid to both the State and the City. Thankfully, New York City Transfer Taxes were not affected by the recent changes. NYC transfer Tax remains 1% for sale of residential property at $500,000 or less and 1.425% for properties sold for more than $500,000. Effective July 1, 2019 sellers of homes priced at $500,000 or less will continue to pay a combined City and State Transfer Tax of 1.4%; sales above $500,000 and below $3 million will result in transfer taxes totaling 1.825% and those selling their home for $3 million or more will paid a total of 2.075% in combined Transfer Tax. Commercial sales of $2 million or more will see total transfer tax increase by .25%