We recently provided updates on the proposed Pied-a-terre tax that had the possibility of being passed in New York City. With the recent passing of the State budget, there has been changes to Real Estate Taxes in New York. Below is everything you need to know about the real estate tax changes as a result of the New York State budget.
Overview: The Pied-a-terre tax was not implemented. Instead, there is a newly revised and implemented Progressive Mansion Tax and Progressive Transfer Tax. This will impact those in the $2-$5M purchase range the most.
The Progressive Mansion Tax:
The new law applies to all closings that take place on or after July 1, 2019 except for those contracts that were entered into prior to April 1, 2019. This is specific to NYC contracts.
The new tax now has 8 tiers that have a higher Mansion Tax rate as purchase price escalates.
The Progressive Transfer Tax:
In addition to the Mansion Tax overhaul, effective April 1, 2019, the Transfer Tax also received an overhaul.
For Residential purchases over $3 million, the NYS Transfer Tax increases from its current rate of 0.4% to a rate of 0.65%.
Additionally, for Commercial transactions greater than $2 million, the NYS Transfer Tax will increase from its current rate of 0.4% to 0.65%.
What Does it Mean for Me?
While no tax increases on property would be ideal, the above could be make less of a blow than the Pied-a-terre tax. The pied-a-terre tax would have positioned New York City as being not investor friendly and was also an annual charge -i.e. the property owner would have incurred this tax every year for owning the pied-a-terre.
As a Buyer, it is important to understand that, while yes, costs of gone up on certain transactions, these taxes are a one-time, upfront cost. The owner does not incur the Mansion Tax and Transfer tax on an annual basis as would have been the case with the pied-a-terre tax.
As was the case with the proposed pied-a-terre tax, the State has earmarked the additional revenue (expected to be $365 million) from the Progressive Mansion and Transfer Taxes to go to the failing MTA system in New York City.
As always, for questions about how taxes impact you, consult your qualified tax advisor who understands your personal financial sitaution