Balancing The Budget By Taxing Real Estate . . . Again!
In the typical “smoky backroom” that is a regular part of the state’s budget process, the legislature passed and the Governor signed an unexpected change to the real estate transfer tax. The surprise change was in lieu of a disastrous possible pied a terre tax that Mayor DiBlasio had originally supported. The new taxes impact NYC only equivalently priced real estate elsewhere in the state is exempt! As the new revenue will (supposedly) be used to update NYC transit, the legislators apparently thought it was appropriate to bill NYC residents for the cost. This of course totally ignores the fact that NYC transit system benefits both residents and non-residents of NYC, and also ignores the reality that NYC has long contributed to tax plans whose revenues funded upstate transit systems, but of course, no one remembered that.
In any event, the increase is now the law, so we need to understand the implications, and be able to advise our clients of the impact as we guide them through an increasingly challenging market.
The changes apply only to transactions that close on or after July 1, 2019. But transactions closing pursuant to contracts signed on or before April 1, 2019 are exempt, without regard to when they close.
Two taxes are increased (and apply only to real estate located in New York City):
Seller transfer tax: Currently, all sellers pay $2 per $500 or the sale price to NYS on all real estate transfers in the state. The additional tax will apply to residential sales (1, 2, 3 family dwellings, condos, and coops) of $3,000,000 and higher, and all other sales (e.g. commercial, mixed-use) of $2,000,000 and up. For these transactions, an additional $2.50 per $1,000 will apply.
Purchaser mansion tax: Residential properties with a purchase price of $1,000,000 or more currently require the purchaser to pay a 1% “mansion” tax. The new, additional tax will affect transactions with a purchase price of $2,000,000 or more.