New York increases transfer and mansion taxes
Owners, buyers and developers of high-end luxury properties will be helping state officials in New York balance the budget for 2019-2020. A substantial increase in the state tax on real estate transfers takes effect on July 1, 2019. Property owners in New York City and other cities throughout the state with populations of at least one million people got more bad news with the announcement of an increase in the so-called “mansion” tax on transfers of properties valued at $1 million or more, which also goes into effect on July 1.
New York State transfer tax
The state transfer tax has been in place in New York for decades. It is a tax levied on the sale of real property located within the state. The tax rate before the most recent action by the state legislature was 0.4% calculated on the amount paid by a buyer or grantee as consideration for the conveyance. Responsibility for payment of the transfer tax falls on the grantor or seller.
Under the new law, the 0.4% tax rate remains for residential properties, including single-family homes, condominiums and cooperative apartments, sold for up to $3 million. The tax rate increases to 0.65% for residential properties sold for $3 million or more.
Sellers of commercial properties will also be subject to an increase in the state transfer tax. The current tax rate of 0.4% increases as of July 1, 2019 to 0.65% on commercial properties sold for $2 million or more.
Mansion tax increase
The conveyance of residential property in cities in New York with populations of one million or more, such as New York City, for consideration of $1 million or more has been subject to a transfer tax equivalent to 1% of the amount paid. The new transfer tax law imposes a higher tax based upon a progressive scale that gradually increases the tax rate from 1% on transfers for at least $1 million but less than $2 million. Rate goes up to 3.9% on conveyances for $25 million or more.
Other points to keep about mind about the new transfer taxes
The effective date of July 1 for the new tax rates can be misleading. Transfer taxes are paid at the time of the conveyance of the property, which would normally be the date of closing of title. The new law grants sellers some relief if they signed a contract to sell their property on or before April 1, 2019.
Another aspect of the new law is that both the buyer and seller are jointly and severally liable for payment of the mansion tax. Learn more about how transfer taxes could affect your real estate transaction by calling us at Mortgage Depot.
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