New York State Has Made Changes to the Mansion Tax and Transfer Tax
There is no getting around the unfortunate and painful fact that New York is one of the highest taxed states in the Union. Moreover, within New York, Westchester County, along with Nassau County on Long Island, are two of the highest taxed counties in New York State. Taxes, whether it be the Mansion Tax or Property taxes, are always a hot button topic for my buyers.
A Quick word on property taxes and home values in Westchester County vs Connecticut before we get to the Mansion Tax Changes and Transfer Tax Changes that were put into effect as part of the 2020 New York State Budget Bill…
When selling Real Estate in Westchester County, the high Westchester Property Taxes certainly make my job more difficult. Quite often, when I am showing my clients New Homes in Chappaqua my buyers are often cross-shopping for homes in nearby Greenwich and Stamford Connecticut which are mere minutes away by car.
When this admittedly painful topic comes up I am very quick to point out the following:
1) While Fairfield County in Connecticut has lower property taxes than Westchester County, similar sized properties in these areas are far more expensive. A similar size home in Fairfield County is often one and a half or double what that same home would cost in a town like Chappaqua, Rye or Scarsdale.
2) The Top Rated School Districts in Westchester County are often regarded as some of the best schools in the Country. While a real estate agent is strictly prohibited from directly commenting on school districts, we invite the home buyer to look for themselves.
3) Commuting to Manhattan from Westchester County, in towns like Pelham and Bronxville could be less than thirty minutes via express Metro- North trains to Grand Central Terminal. On the Northern tip of the County in towns like Katonah and Somers, the train rides are still not longer than one hour.
4) Access to Airports from Westchester for those who travel frequently is far more convenient than access to airports from Fairfield County. White Plains airport is in the center of Westchester county for Regional Flights, LaGuardia airport is about 45 Minutes away and John F Kennedy International Airport is about an hour. With the exception of LaGuardia airport, the commutes from Fairfield County to the airports are considerably longer.
Truth be told, I can go on and on about this topic, but that is a blog post for another day. Today we are here to discuss the recent changes to the Mansion Tax and the Transfer Tax.
Changes to the Mansion Tax in Westchester County
Until April 1, 2019 the Mansion Tax was a 1% tax paid by buyers of homes in all of New York State where the sales price was 1 Million Dollars or greater. The size, location or type of home did not come into play. Even a 300 square foot home that was priced over 1 million dollars was considered a “Mansion” for tax purposes. A 1 million dollar house commanded the buyer to pay a mansion tax of ten thousand dollars, a 2 million dollar home would have a mansion tax of twenty thousand dollars and so on.
The Mansion Tax, as described above, was calculated and levied in the same manner throughout all of New York State. Going forward, the Mansion Tax is increasing, but NOT for Westchester County. The New Mansion Tax will be calculated the following way based on purchase price:
>Under 1 Million: No Mansion Tax (Remaining the same)
>1 Million to 2 million: 1% (No Change)
>2 Million to $2,999,999: 1.25%, an increase of .25%
>3 Million to $4,999,999: 1.5%, an increase of .5%
>5 Million to $9,999,999: 2.25%, an increase of 1.25%
>10 Million to $14,999,999: 3.25%, an increase of 2.25%
>15 Million to $19,999,999: 3.5%, an increase of 2.5%
>20 Million to $24,999,999: 3.75%, an increase of 2.75%
>25 Million or more: 3.9%, an increase of 2.9%
But here is the catch, and why the Mansion Tax will not increase in Westchester County: The Mansion Tax increases, as illustrated above, are only applicable for properties located in cities that have a population of more than 1 million people. As of today, only New York City Qualifies for the increased mansion tax rates based on population.
The New York State Transfer tax is paid by the seller of real property in New York State. However, unlike the Mansion Tax, which is paid by the buyer, the transfer tax is usually paid for by the seller unless negotiated otherwise.
Until April 1st of 2019, the Transfer Tax for residential properties in all of New York State was $2 for every $500 of the purchase price in a transaction, or .4%. As part of the New York State budget bill for 2020, the transfer tax changes as follows:
>All residential real property transactions with a sale price of less than 3 million dollars: $2 for every $500 of the purchase price in a transaction, or .4%. No Change
>All residential real property transactions with a sales price of over 3 million dollars: $3.25 per $500, or .65 percent, an increase of .25%
Unlike the Mansion Tax, the transfer tax changes affect all parts of New York State and are not confined to cities with populations of 1 million people or more.
Can I deduct my closing costs in Westchester County?
An eye-opening part of many of my transactions come when clients receive their estimated closing cost summary from either their attorney or their attorney’s title company. Clients, especially buyers are amazed by the out of pocket expenses and cash necessary to close escrow on a typical home purchase. The most significant part of these costs is the mansion tax, mortgage recording tax and potential tax escrows for a buyer and the New York State Transfer taxes and realtor commissions for a seller. One question I often get is “Can I use my closing costs as a deduction on my income taxes?”. Well, unfortunately, you cannot. However, NestEdge Realty can play a large part in avoiding the mansion tax or otherwise reducing closing costs for buyer or seller.
For buyers, NestEdge Realty offers extremely generous broker commission rebates. Our rebates are in essence a portion of our commission, which we share with our clients. This is not only completely legal in New York State, but it is also tax-free. Our rebates are larger than those offered by Redfin in Westchester and can offset the mansion tax, other closing costs or even renovations.
For sellers, NestEdge lists properties and acts as a full service, traditional realtor, with two significant differences. First, we pride ourselves on offering to beat the commissions charged by all traditional realtors, and, we strive to attend all showings when many traditional realtors expect a lockbox to do their job for them.