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April 3, 2019

Stroock Special Bulletin

By: Ross F. Moskowitz, , Brian J. Senie, Eva C. Schneider

This week, as part of the New York State 2020 Budget, the State Senate and Assembly adopted legislation[1] that increases real estate transfer tax rates (including the so-called mansion tax) on conveyances of real property located in New York City.[2]

These changes, described below, apply to real property transfers including cooperative apartments occurring on or after July 1, 2019; however, real property transfers pursuant to contracts entered into on or before April 1, 2019, are exempt (even if they close after July 1), provided that the contract’s date of execution can be confirmed by independent evidence.[3]

Transfer Tax

New York State imposes a real estate transfer tax, for which the seller (or “grantor”) is generally responsible, on conveyances of real property in New York State.[4] Prior to the adoption of the new legislation, a transfer tax rate of 0.4% (2 dollars for every 500 dollars of consideration) applied to all taxable conveyances of real property; this tax still applies. On top of this, pursuant to the newly adopted legislation, an additional 0.25% (for a total of 0.65%) is added for (1) conveyances of “residential real property”[5] for consideration of $3 million or more, and (2) conveyances of any other real property (i.e., multiunit or commercial) for consideration of $2 million or more.

For commercial transactions under $2 million and residential transactions under $3 million, the New York State transfer tax rate remains at 0.4%.

Mansion Tax

New York State also imposes a “mansion” tax on transfers of residential real property including cooperative apartments for consideration of $1 million or more. Unlike the transfer tax, the mansion tax is the responsibility of the buyer (or “grantee”). Prior to the adoption of the new legislation, the applicable mansion tax rate was 1% of the total consideration. The new legislation preserves this “original” mansion tax of 1%, and imposes an additional “progressive” mansion tax on top of it, ranging from 0.25% on transfers for $2 million or more of consideration to 2.9% on transfers for $25 million or more of consideration.

Provided below is a chart summarizing the various tax rates and the total New York State transfer and mansion tax that would be imposed on a transaction.

As noted, the grantor is generally responsible for the transfer tax, whereas the grantee is responsible for the mansion tax,[6] and these taxes are in addition to any other local municipality transfer taxes that may apply. Both the transfer tax and the mansion tax are payable on the “first dollar” of consideration. That is, if a sale of residential real property were for precisely $1 million, the tax would apply to the entire $1 million of consideration.

Summary Chart

Conveyances of Residential Real Property
Conveyance Transfer Tax Mansion Tax Total Tax Rate
(paid by grantor
and grantee)
? $1M
but < $2M
0.4% 1% 1.4%
? $2M 
but < $3M
0.4% 1.25% 1.65%
? $3M 
but < $5M
0.65% 1.5% 2.15%
? $5M 
but < $10M
0.65% 2.25% 2.9%
? $10M 
but < $15M
0.65% 3.25% 3.9%
? $15M 
but < $20M
0.65% 3.5% 4.15%
? $20M 
but < $25M
0.65% 3.75% 4.4%
? $25M 0.65% 3.9% 4.55%

 

Conveyances of Commercial Real Property
Conveyance Transfer Tax
< 2M 0.4%
? $2M 0.65%

 

If you have any questions about the new legislation or are interested in how this could affect your real estate needs, please feel free to reach out to the lawyers listed below.

 

For More Information:

Ross Moskowitz
Brian Senie
Eva Schneider

This article is for general information purposes only. It is not intended as legal advice, and you should not consider it as such.


[1] For the full text of the legislation, please click here.
[2] The provisions apply in cities in New York State with a population of 1 million or more. The only city in New York State currently with such a population is New York City.
[3] The legislation provides that “independent evidence” shall include “recording of the contract, payment of a deposit or other facts and circumstances as determined by the commissioner of taxation and finance.”
[4] New York City also imposes a separate real property transfer tax (2.625% for commercial and 1.425% for residential), which is not addressed in this bulletin.
[5] For purposes of both the transfer tax and the mansion tax, the legislation states: “Residential real property shall include 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, or a cooperative unit.”
[6] In the event that the grantor does not pay the transfer tax or the grantee does not pay the mansion tax, the other party may be held liable for the respective tax.