NYS Budget Battle Settles on (Surprise!) Higher Transfer Tax and an Increased Mansion Tax

SALT Chat

04.01.19 | SALT Chat

In the ongoing NYS war over taxes, the additional surcharge on certain high-value non-primary residences in New York City, discussed in last week’s blog, proved to be a Mission Impossible. Intense lobbying by the NYC real estate industry and questions about enforceability sealed its fate. But never fear!

The Governor, New York State Assembly and New York State Senate finally agreed on the 2019 – 2020 State Budget late yesterday. The most significant provisions include an increase in the New York State Transfer Tax and the New York State “Mansion Tax” for certain properties located in New York City. The increases are effective for conveyances occurring on or after July 1, 2019. Binding written contracts entered into on or before April 1, 2019 will not be subject to the increases.

The increase in the transfer tax came as something of a surprise. Currently, the State transfer tax is 0.4% for any type of real property. The new tax will add an additional 0.25% for residential properties of $3 million or more and for any type of property of $2 million or more. This raises the current State rate to a maximum of 0.65% for properties within New York City (only).

The current Mansion Tax is a 1% tax imposed on the buyer of residential real property in New York State when the purchase price is $1 million or more.

The increased tax, to properties within New York City is as follows:

• 0.25% for consideration of at least $2 million but less than $3 million
• 0.5% for consideration of at least $3 million but less than $5 million
• 1.25% for consideration of at least $5 million but less than $10 million
• 2.25% for consideration of at least $10 million but less than $15 million
• 2.5% for consideration of at least $15 million but less than $20 million
• 2.75% for consideration of at least $20 million but less than $25 million
• 2.9% for consideration of at least $25 million

This raises the maximum Mansion Tax rate to 3.9%.

How these increased will impact the New York luxury real estate market will be the subject of intense debate in the weeks to come. If I have raised questions, contact me at WBerkowitz@BerdonLLP.com or your Berdon advisor.

Wayne Berkowitz, a tax partner and head of the State and Local Tax Group at Berdon LLP, advises on the unique requirements of governments and municipalities across the nation.