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2019 New York State Real Property Transfer Tax And Mansion Tax Increases or, Just When You Thought Your Tax Burden Couldn’t Get Any Worse!
As New York State’s Governor Cuomo embarked on a search for new sources of tax revenues, ultimately residential real estate and real estate transactions were in his crosshairs!
An initial tax idea, summarily discarded, was known as the pied-a-terre tax and ‘would have targeted foreign and out-of-state owners of Manhattan apartments to fund mass transit repairs’.
Instead, Governor Cuomo and the Albany politicians focused on more low-hanging tax fruit, settling on hikes in the Real Property Transfer Tax and the Mansion Tax to drive additional revenue.
Below is an explanation, provided by the Fidelity National Title Group, of the tax increases in terms of property type, location and value of the properties that will be subject to the increased tax levy.
Re: Real Property Transfer Tax Increases
The 2019 New York budget bill included two provisions that increase the Real Property Transfer Tax in some instances. These provisions are in Part OOO of the Budget Bill (S1509-C/A2009-C) and make amendments to Section 1402 of the Tax Law.
The act takes effect on July 1, 2019. It applies to conveyances closing on or after July 1, 2019, but does not apply to conveyances made pursuant to binding written contracts entered into on or before April 1, 2019, even if they close after July 1. You must be able to prove the date of execution by independent evidence such as a recorded contract, payment of a deposit or other facts and circumstances determined by the commissioner of taxation and finance. At this point, we do not have any further guidance from taxation and finance on this.
Location of Properties Affected by the Changes
The changes apply only to real property located in any city in New York having a population of one million or more. Currently, these changes would only apply to the five boroughs of New York City.
Increase of Transfer Tax:
Residential Properties of $3 Million or More; Other Properties of $2 Million or More
The first change is to the New York State transfer tax provided for in Section 1402 of the Tax Law. This is a change to the basic transfer tax of two dollars per five hundred dollars of consideration to which we are accustomed.
As of July 1, 2019, an additional transfer tax of one dollar and twenty-five cents for each five hundred dollars of consideration will be added to the conveyance of residential property where the consideration is three million dollars or more and to any other property where the consideration is two million dollars or more.
For purposes of this section residential real property is “any premises that is or may be used in whole or in part as a personal residence, and shall include a one, two, or three-family house, an individual condominium unit, or a cooperative apartment unit.”
Mansion Tax – New Supplemental “Mansion Tax”
The second change adds a new Section 1402-B to the Tax Law. This provides for a new tax that is supplemental to the existing “Mansion Tax” on residential real property (Tax Law 1402-A). In other words, the existing statewide Mansion Tax on residential properties of $1 million or more remains in effect. The 1402-B tax, as set forth below, is on top of the existing Mansion Tax.
The new supplemental tax applies only to residential real property in a city with a population of one million or more when the consideration is two million dollars or more (currently New York City only). Residential property is again defined as “any premises that is or may be used in whole or in part as a personal residence, and shall include a one, two, or three-family house, an individual condominium unit, or a cooperative apartment unit.”
$2mill but less than $3mill charge ¼ of 1%
$3mill but less than $5mill charge ½ of 1%
$5mill but less than $10mill charge 1 ¼%
$10mill but less than $15mill charge 2 ¼%
$15mill but less than $20mill charge 2 ½%
$20mill but less than $25mill charge 2 ¾%
$25mill and up charge 2.9%
In addition, both the “Mansion Tax” imposed by Tax Law 1402-A and the new supplemental tax imposed by Tax Law 1402-B are now the joint and several liability of the grantor and the grantee. If the grantee fails to pay the tax or is exempt from payment of the tax, the grantor and grantee are jointly and severally liable for the taxes.