In this video, we will demystify the topic of the mansion tax in New York
City real estate. I'm Nick from Hauseit New York City's largest for sale by
owner and buyer closing credit company. Thanks for watching. The Mansion Tax in
New York City is one of the largest buyer closing costs faced by home
purchasers in the city. Specifically the tax applies to purchases where the total
consideration is $1 million or more. Therefore if you're buying an
apartment or a house that is $800k or $900k
anything less than $1 million fortunately for you, this tax will not
apply. The mansion tax itself was originally implemented in 1989 by then
New York Governor Mario Cuomo. The original tax was a fixed 1% tax
rate on the entire purchase amount again for properties of $1 million or
more. In an attempt to raise revenue, the government of New York recently revamped
and raised the mansion tax in 2019. The changes they made morphed the tax away
from a fixed 1% amount to a more progressive tax structure which raises
the tax based on the purchase price as you move closer to $25 million.
The original 1 % mansion tax rate still applies to purchases of $1 million
or more and less than $2 million. However once you hit the $2
million threshold the mansion tax increases up to 1.25%
Similarly once you hit the $3 million threshold, the tax
increments up further to 1.5%. To view all the mansion tax
brackets in New York City, visit our website www.hauseit.com/nyc-mansion-tax. Now many buyers ask
Is the mansion tax negotiable? Can I get the seller to pay for it? And it's a very
good question because the answer really comes down to the fact that pretty much
everything in a New York City real estate transaction is negotiable
but your request for a concession on the side of the seller has to make sense in
the context of the other demand and expressions of interest that a seller
may be facing and receiving. If a property has numerous offers and open
houses are well trafficked, it is highly unlikely if not downright offensive to
think that the seller may cover the mansion tax. Conversely, if you are buying
a very expensive new construction condo in Hudson Yards it is possible that
through the course of a negotiation with the developer they may be willing to
cover some or all of your mansion tax and perhaps other closing costs
specifically related to new developments but we'll discuss that in another video.
Another common question buyers ask us regarding the mansion tax is whether or
not it is tax deductible. Now the mansion tax is not deductible in
the year of your purchase. However, as with any of your other buyer closing
costs it is added to the capitalized cost of the asset and therefore helps
you reduce any capital gains tax you may owe when you sell the property.
Another interesting quirk of the mansion tax in New York City is that it is based
on the total consideration of your purchase. Even if your purchase price is
technically below $1 million, you may still have to pay the mansion tax if
you agree to pay for example the sponsor or the sellers transfer taxes because
that would make the total consideration go above the $1 million threshold.
Many savvy buyers try to devise ways to avoid the mansion tax and another
commonly suggested method is to purchase the furniture in an apartment separately
in order to lower the purchase price below the $1 million threshold. If
you embark upon this strategy, you will need to pay sales tax on that furniture
separately as part of your annual tax return filing. It's also important to
ensure that you are not deliberately trying to structure a transaction in
order to evade the mansion tax or any other tax levied by the city or the
state as that could land you in legal hot water. We always suggest that you
speak with an attorney, an accountant and a tax advisor when it comes to any
strategies you may be considering for mitigating closing costs on a purchase.
We hope that was helpful and thank you for watching. Feel free to subscribe
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