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.