NYS'S NEW 2020 TAX LAW INCREASES THE COST OF TRADING REAL ESTATE

Governor Andrew Cuomo and the New York State Legislature just adopted the Fiscal Year 2020 (April 2019 through March 2020) budget. The spending plan for the upcoming fiscal year addresses critical issues that impact your future decision to purchase. 

As a result of the State budget just adopted in Albany, hundreds of millions of dollars on an annual basis will flow from the City’s real estate sector toward supporting the region’s mass transit network.  The Governor and Legislature agreed to make changes to the New York State Transfer Tax and the Mansion Tax to raise revenue.

These updated tax rates will apply to all closings that take place on or after July 1, 2019 with the exception of transactions where a contract of sale was entered into on or before April 1, 2019. Accordingly, if you have clients sitting on the sideline waiting to make an offer, you want to get into contract and closed before July 1, 2019.

The new taxes take effect July 1 of this year (Credit: iStock)

Here is a great tax calculator that will allow you to calculate the old vs. new taxes.  Thanks to the Real Deal.

Below is a breakdown of the new taxes that NYS just agreed on April 1st, 2019.

The following only applies to NYC 

Current NYS Transfer Tax: .4% of the transaction

New NYS Transfer Tax:

.65% for commercial transactions greater than $2M

.65% for residential transactions greater than $3M

Old Mansion Tax rate:

Over $1M                                                                                                               1%

Under the existing law, the Mansion Tax was calculated as 1% of the Purchase Price for properties of $1M or more and it remained constant at 1% regardless of how high the purchase price was.  Under the newly passed budget, the Mansion Tax rate increases as the price of property increases. 

New Mansion Tax rates:

From $2M to less than $3M                                                                                1.25%

From $3M to less than $5M                                                                                1.5%

From $5M to less than $10M                                                                              2.25% 

From $10M to less than $15M                                                                           3.25%

From $15M to less than $20M                                                                           3.5%

From 20M to less than $25M                                                                             3.75%

From $25M or more                                                                                            3.9%

Effective Date:  This act shall take effect July 1, 2019, and shall apply to conveyances occurring on or after such date other than conveyances which are made pursuant to binding written contracts entered into on or before April 1, 2019, provided that the date of execution of such contract is confirmed by independent evidence, such as the recording of the contract, payment of a deposit or other facts and circumstances as determined by the commissioner of taxation and finance.