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New York State Budget Agreement Results in New Transfer and Mansion Tax Rates

(Impacts Contracts Signed After 4/1/19 that Close After 7/1/19)

By: Daniel Gershburg, Esq.

Governor Cuomo and the New York State Legislature have adopted a budget for the Fiscal Year 2020 (April 2019 thru March 2020). During the budget negotiation process, the real estate sector was targeted as a source of additional revenue to offset the growing costs of the area’s mass transit network. Many have suggested that the recent $238 million condominium inspired Albany on this front.

At first, as my partner Pierre Debbas (see link to Bloomberg article below) pointed out, the State sought to impose an aggressive Pied-a-Terre tax. However, this effort by the State was challenged by the real estate community. As a result, the State changed course and opted to impose new transfer taxes (typically paid by sellers) and mansion taxes (typically paid by buyers). For commercial real estate sales over $2 million, the Transfer Tax will increase from 0.4% to 0.65%. For residential transactions over $2 million, the Mansion Tax increases based upon sales price all the way up to 3.9% for properties over $25million. This is a huge increase over the previous 1%.

Below, please find a breakdown of the new Mansion and Transfer Tax rates paid in residential transactions and resulting revenue.

Price NYS Txfr Tax NYS Mansion Tax Total Taxes
Less than 1,000,000.00 0.4% 0.00% 0.40%
$1,000,000.00 – $1,999,999.00 0.4% 1.00% 1.40%
$2,000,000.00 – $2,999,999.00 0.4% 1.25% 1.65%
$3,000,000.00 – $4,999,999.00 0.65% 1.5% 2.15%
$5,000,000.00 – $9,999,999.00 0.65% 2.25% 2.90%
$10,000,000.00 – $14,999,99.00 0.65% 3.25% 3.90%
$15,000,000.00 – $19,999,999.00 0.65% 3.50% 4.15%
$20,000,000.00 – $24,999,999.00 0.65% 3.75% 4.40%
$25,000,000.00 + 0.65% 3.90% 4.55%

Although the ultimate impact of these new taxes won’t be known for some time, it is safe to assume that this will not be positive for the already soft ultra-high end residential market.

Attached Bloomberg Tax Articles

NYS Budget Agreement Results in New Transfer and Mansion Tax Rates – by Michael J. Romer
The Pied-A-Terre Tax and its Detrimental Impact on the NYC Real Estate Market – by Pierre E. Debbas