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Buying Guide

What is NYC 421-A Tax Abatement?

Are you planning to invest in real estate in New York City? We guarantee that you’ll love the NYC 421-A tax abatement program, especially if you, like most people, are not a fan of taxes. So long as you are a property developer in NYC, you can easily get the NYC 421-A tax abatement, but your goal must be to offer affordable housing for the city’s residents. The program reduces your property tax bill for a specific duration. In most cases, it lasts for ten years, but yours could be 15 or 25 years, depending on the code it is registered with. For instance, codes 5117 and 5110 provide a ten-year term, while code 5114 comes with a 25-year period.

If you’d love to know more about the NYC 421-A Tax Abatement, read on!

We’ll start with the program’s history.

The History of the NYC 421-A Tax Abatement

The NYC 421-A Tax Abatement began in 1971. Its objective was to encourage NYC property developers to make the most out of underutilized land in New York City by investing in affordable residential buildings for families. The program prompted the construction of thousands of condos in Manhattan and other NYC boroughs. Today, the NYC 421-A tax abatement is still incredibly popular. The buildings benefitting from this tax abatement are twice as many as those with other property tax programs.

Home buyers will be delighted to know that the buildings they plan to purchase come with a 421-A tax abatement. Research all the essential information about this program because it has six codes, each offering a different property tax reduction percentage. Some people have often wondered if buying a building with an NYC 421-A tax abatement is an excellent idea. The answer to this is; it depends solely on the buyer’s preference.

What to Expect When Investing In a Property with a 421-A Tax Abatement?

A property with tax abatement is undoubtedly better than one without, but things could get a little complicated. For starters, expect most home sellers to sell apartments with a 421-A tax abatement at a higher cost upfront. They already know that you will spend a lot less on property taxes. While this might not be a problem for real estate investors with a high and flexible budget, those with low, tight budgets may not see it that way. You should always evaluate the home seller’s asking price for a property with tax abatement and the cost of one without. When that’s done, ask yourself the question; Is it really worth it?

When buying a house with tax abatement, you should also anticipate dealing with certain risks. A home seller could choose to sell their co-op or condo because the 421-A tax abatement period is close to expiring. If you purchase the property blindly, you might not enjoy the tax reduction benefits you hoped for.

After reading through this article and understanding the NYC 421-A tax abatement, you could take advantage of it as a real estate investor. The main advantage of purchasing a property with this tax abatement is that your property’s tax bill will be considerably reduced. Ensure that the apartment or condo you are buying is worth it. Before paying for the residential property, ensure that there are a good number of years left in the tax abatement. 

Categories
Buying

New York City Mansion Tax Guide [2021]

Are you a potential homebuyer looking to purchasing a home or apartment in New York City? You must have heard of the NYC mansion tax, a closing cost that many property buyers in the city have incurred. Supposing that the residential property you wish to buy is worth more than $1 million, prepare to pay this tax, which dates back to 1989, the year this tax was created by former Gov. Mario Cuomo. The NYC mansion tax was meant to enhance the New York State’s budget, like all other taxes.

If you’re a first-time property buyer, it may all be a little confusing, but you need not worry. This guide provides essential information about the famous NYC mansion tax. Read on.

Who Pays the NYC Mansion Tax? And how much is it?

As a homebuyer, it is prudent to know the mansion tax you have to pay before becoming a legal homeowner in New York City. It helps you to manage your budget correctly. The value of your home determines the tax rates.

If your property’s cost is $1-$1.999 million, the tax rate is 1%, meaning that the tax amount will be $10,000. The percentage soars as your home’s value increases. For instance, should you be buying a house worth $20-$24.999 million, the NYC mansion tax rate will be 3.75%.

Remember that this tax is payable during the closing on your new home, but you can also pay it within the first fifteen days of closing. If you don’t do it by then, the home seller will also be in trouble.

After calculating the NYC mansion tax amount, you are required to pay, begin the process of paying it.

How to Pay the NYC Mansion Tax?

Since the NYC mansion tax is considered a real estate transfer tax, the necessary tax documents must be submitted together with the Form TP-584. The title company can hand in the filing on your behalf, regardless of whether you buy a condo or townhouse. If you are purchasing a housing cooperative (co-op), work with your real-estate lawyer when submitting your tax fillings.

How to Avoid Paying NYC Mansion Taxes?

The NYC mansion tax can be insanely expensive, especially for home buyers who have just enough money to purchase their new one or two-bedroom home. Like many others, you must be wondering if there is a way you can avoid paying this tax. Unfortunately, there isn’t. The law requires you to pay the NYC mansion tax to be a legal homeowner in the United States’ most populous city.

Even so, there are exemptions when it comes to homebuyers paying the NYC mansion tax. When a government body purchases a residential property, the organization doesn’t have to pay the tax. The same case applies to closings that are as a result of federal bankruptcy.

This guide aims to shed more light on the NYC mansion tax for homeowners looking to invest in your dream residential property in New York City. Make sure you pay the tax during the closing, or at most 15 days later. Otherwise, you and the home seller will be held responsible. It is worth noting that houses with a value of less than $1,000,000 are exempted from this tax.