Every week, Mansion Global poses a tax question to real estate tax attorneys. Here is this week’s question.
Q: I’ve been considering buying a townhouse in Manhattan, but I’ve been reading about an additional mansion tax that New York City Mayor Bill de Blasio has proposed. What do I need to know?
A: "New York state already has a 1% mansion tax on sales of residential property over $1 million. Mayor de Blasio is simply [proposing] adding an additional layer of New York City tax for those that sell for more than $2 million," said Gideon Rothschild, chair of Trusts and Estates and Asset Protection practices at Moses & Singer, a New York law firm. "This would result in an additional tax of 2.5%."
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The 1% mansion tax is typically paid by buyers, within 15 days after closing, said Stanley Barsky, partner at Fox Rothschild law firm in New York City. Or the tax is reflected in the sales price, Mr. Rothschild noted.
Mr. de Blasio proposed the 2.5% mansion tax, which would apply to any residence—including co-ops, townhouses and condos—to raise funds for affordable housing for seniors.
Currently, the transfer tax for a New York City home is 2.825% (state transfer tax of .4%, plus the city transfer tax of 1.425% plus the 1% mansion tax). If the 2.5% New York City mansion tax is passed by the state, an additional $52,500 would be assessed on a $2.1 million sale, Mr. Rothschild said.
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However, it is unclear whether the proposal would be approved by the New York state legislature, Mr. Barsky said. The mayor had proposed a similar measure in 2015, a 1% tax for homes that cost more than $1.75 million. It was not approved. It’s likely that the Republican-led state Senate won’t approve the latest proposal either. Senate Majority Leader John Flanagan has called it a "non-starter."
Even if the 2.5% tax is approved and goes into effect July 1, 2017, Mr. Rothschild said he didn’t think this additional tax will have a significant impact on the market. "Given that NYC real estate prices are already so high, it will be viewed as a cost of living in New York City," he said.
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