Buying in New York City and getting close to the one million dollar mark? That is the point when the state’s “mansion tax” can kick in and affect your closing budget. If you are planning a condo, co-op, or townhouse purchase across Manhattan, Brooklyn, Queens, or nearby suburbs, it pays to know how this tax works. In this guide, you will learn what the mansion tax is, when it applies, how it is collected, and how buyers and sellers often handle it in contracts. Let’s dive in.
What is the mansion tax
The mansion tax is New York State’s additional 1 percent tax on the conveyance of residential real property when the consideration is 1,000,000 dollars or more. It is commonly called the “mansion tax,” though it applies to many city homes that are not mansions. As of 2024, the rate is 1 percent of the total purchase price, not the loan amount.
In practice, you calculate it simply. If you buy at 1,200,000 dollars, the mansion tax is 12,000 dollars due at closing. It is a state tax that shows up most often in New York City deals because many sales cross the 1,000,000 dollar threshold.
When it applies
The mansion tax applies when the total consideration for a residential transfer is at least 1,000,000 dollars. Consideration generally means the contract price or other agreed value used for the transfer. It is not based on how much you finance.
If a property has both residential and commercial components, parties often allocate the purchase price between the two. The tax follows the portion attributable to the residential component. That allocation should be documented in the contract and supported by valuations to avoid issues.
Because tax rules can change, confirm the current rate and how it applies to your exact deal with your attorney or CPA before you sign.
Covered property types
The mansion tax commonly applies to residential purchases across the city and nearby suburbs, including:
- Condominiums
- Cooperative apartments (share transfers with a proprietary lease)
- One to four family houses and townhouses
- Residential units within mixed-use buildings, based on allocation
For co-ops, you buy shares in a corporation rather than a deeded apartment. The tax still applies when the total consideration is 1,000,000 dollars or more.
How payment works at closing
In most New York City transactions, the mansion tax is collected and paid at closing as part of your buyer closing costs. Here is how it typically works:
- The buyer’s attorney or the title company collects the mansion tax amount with your closing funds.
- The collecting party files the required New York State transfer documents, such as Form TP-584, and remits the payment to the state.
- In co-op deals where a title company is not involved, the buyer’s and seller’s attorneys coordinate the filing and payment.
- Payment is due at the time of transfer, which is when your deed is recorded for condos and houses, or when co-op shares are delivered.
Other NYC closing costs to expect
The mansion tax is only one piece of the closing-cost picture. In New York City, buyers should also plan for:
- New York City Real Property Transfer Tax for transactions within the five boroughs, separate from the state rules
- New York State real estate transfer tax filings
- Mortgage recording tax if a mortgage is recorded
- Title insurance premiums, recording fees, and customary legal and closing charges
The totals vary by property type, loan size, and whether you are buying a condo, co-op, or townhouse. Your attorney can prepare a custom closing estimate early in the process so you can budget with confidence.
Who usually pays
Standard practice in New York City is for the buyer to pay the mansion tax. That said, this cost can be a point of negotiation between buyer and seller. You may see a seller concession, a price adjustment, or a split of closing costs depending on market conditions and the leverage on both sides.
To avoid surprises, include a clear clause in the contract that specifies who pays the mansion tax. Your attorney will ensure the language matches your negotiation.
Examples to make it clear
- Purchase price of 1,000,000 dollars results in a mansion tax of 10,000 dollars.
- Purchase price of 2,500,000 dollars results in a mansion tax of 25,000 dollars.
These examples illustrate the straightforward 1 percent calculation. The tax is based on the consideration for the transfer, not the loan amount.
Special situations to know
Some deals require extra care. Here are common scenarios:
- Co-ops: The substance is the same, but procedures differ since you transfer shares and a proprietary lease. Attorneys handle remittance and filings.
- Condos and townhouses: Title insurance is common, and the title company often handles remittance with the state forms at recording.
- Mixed-use buildings: The parties allocate purchase price between residential and commercial components. The mansion tax follows the residential portion of the consideration.
- Exemptions: Certain transfers, such as some transfers between spouses or to governmental entities, can be treated differently under state law. These are specific, statutory exemptions that your attorney will verify.
- Unusual structures: Buying or selling an entity that owns the real estate can raise distinct tax questions. Specialist counsel should guide the structure and filings.
- Aggregated or adjacent units: Combining multiple units or using multiple documents can change how consideration is counted. Counsel should review the structure before you commit.
Planning tips for buyers
If your target price range puts you near the threshold, plan ahead:
- Budget early. Build the 1 percent mansion tax into your closing-cost estimate if you expect to purchase at 1,000,000 dollars or more.
- Clarify the payer. Decide before you sign whether you or the seller will cover the tax, then include it in the contract.
- Align loan strategy. The mansion tax is not based on the mortgage amount, so loan size does not change the tax due, but it does affect other closing costs.
- Document allocations. For mixed-use or complex deals, support your allocation with appraisals or valuation memos.
- Confirm current rules. Ask your attorney and CPA to confirm the applicable rate, how the tax is filed, and how it may affect your basis or deductions under current law.
Planning tips for sellers
If you are selling a condo, co-op, or townhouse likely to trade at or above 1,000,000 dollars, you can prepare as well:
- Expect buyer questions. Be ready to discuss the mansion tax and other closing costs during negotiations.
- Consider concessions. In competitive markets, offering a credit or cost share can help a buyer clear the finish line.
- Keep the contract clear. Ensure the contract specifies who pays each tax and fee to avoid late-stage disputes.
Common questions buyers ask
Here are quick answers to issues that come up often:
- Is it a state or city tax? The mansion tax is a New York State tax. New York City also has its own transfer tax that is separate.
- Does it apply to the mortgage or the purchase price? It applies to the consideration for the transfer, which is usually the contract price.
- Is it refundable or deductible? It is generally not refundable unless there is an overpayment or filing error. Deductibility depends on current federal tax law and your situation, so consult a CPA.
- Could the rule change? Tax proposals appear often. Your attorney can confirm the current law for your closing date.
Next steps
If you are shopping across Manhattan, Brooklyn, Queens, or nearby suburbs and expect to buy at 1,000,000 dollars or more, plan for the 1 percent mansion tax in your budget. Decide how you want to approach it in negotiations, and ask your attorney to spell out who pays in the contract. For mixed-use or complex structures, involve your CPA and counsel early so your allocations and filings are clean.
If you would like a clear closing-cost estimate tailored to your target buildings and price range, reach out to Gina Sabio. You will get discreet, informed guidance shaped by more than two decades of NYC closing experience.
FAQs
What is the NYC mansion tax and who imposes it?
- It is a New York State 1 percent tax on residential transfers of 1,000,000 dollars or more, commonly seen in NYC deals.
When does the 1 percent mansion tax apply on NYC homes?
- It applies when the total consideration for a condo, co-op, or house purchase is at least 1,000,000 dollars.
Who usually pays the mansion tax at closing in NYC?
- Buyers typically pay it in New York City, though the cost is negotiable and should be stated in the contract.
Does the mansion tax apply to condos, co-ops, and townhouses?
- Yes, it applies across these residential property types when the consideration meets or exceeds the threshold.
Is the mansion tax based on the mortgage amount or purchase price?
- It is calculated on the consideration for the transfer, usually the contract purchase price, not on the mortgage amount.
How is the mansion tax handled in co-op closings in NYC?
- Attorneys for the parties coordinate collection and filing, since co-op deals typically do not involve a title company.
Is the mansion tax refundable or deductible for federal taxes?
- It is generally not refundable except for overpayments, and deductibility depends on your circumstances and current federal law, so consult a CPA.
How does the mansion tax interact with New York City transfer taxes?
- It is separate from the city’s Real Property Transfer Tax, which can also apply in NYC closings and is calculated under different rules.
