As part of the 2020 budget, the New York State Senate and Assembly enacted new revenue legislation, which included an increase to New York State’s transfer tax and mansion tax on transfers of real property. The changes enacted will apply only to transfers in New York City and other cities with a population of 1 million or more. The changes described below apply to all transfers occurring after July 1, 2019. However, transfers made pursuant to a binding agreement entered into on or before April 1, 2019 (as confirmed by independent evidence such as a recording of the contract or a deposit), and closing after July 1, 2019, will not be subject to the increased taxes described below.
Generally, New York State (NYS) imposes a transfer tax on transfers of real property located in the state. In addition to such transfer tax, NYS imposes a tax (commonly known as the “mansion tax”) on transfers of residential real property where the consideration is in excess of $1 million.
NYS Transfer Tax Change
NYS transfer tax prior to the change was $2 for every $500 (or fraction thereof) of consideration, subject to limited exceptions and exemptions. The new law levies an additional tax of $1.25 for each $500 (or portion thereof) of consideration on transfers of (i) residential property where consideration is in excess of $3 million and (ii) commercial property where consideration is in excess of $2 million. The chart below shows the applicable rates for a transfer in New York City (or other city with population over 1 million).
|
Consideration Amount |
NYS Transfer Tax Rate — Residential |
NYS Transfer Tax Rate — Commercial |
|
Under $2 million |
.4% |
.4% |
|
$2 million ‒ $3 million |
.4% |
.65% |
|
Over $3 million |
.65% |
.65% |
Mansion Tax Change
Prior to the enactment, the NYS mansion tax was imposed on transfers of residential real property with consideration in excess of $1 million at the rate of 1 percent of the consideration paid. The new law increases this tax on a sliding scale for transfers where the consideration is in excess of $2 million, up to the highest tax rate of 3.9 percent on transfers with consideration in excess of $25 million. The chart below shows the applicable rates for a transfer in New York City (or other city with population over 1 million).
|
Consideration Amount |
Total NYS Mansion Tax Rate |
|
Under $1 million |
Not subject to tax |
|
At least $1 million, but less than $2 million |
1% |
|
At least $2 million, but less than $3 million |
1.25% |
|
At least $3 million, but less than $5 million |
1.5% |
|
At least $5 million, but less than $10 million |
2.25% |
|
At least $10 million, but less than $15 million |
3.25% |
|
At least $15 million, but less than $20 million |
3.5% |
|
At least $20 million, but less than $25 million |
3.75% |
|
More than $25 million |
3.9% |
Under the new law, the grantor could potentially be liable for the mansion tax if the grantee fails to pay it.
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