If you are buying property in New York City and the purchase price is one million dollars or more, you will owe the mansion tax. Despite its name, this tax has nothing to do with the size or type of the property. It applies to studio apartments, one-bedroom condos, co-ops, townhouses, and yes, actual mansions, as long as the purchase price meets the threshold. In a city where the median home price regularly exceeds one million dollars in many neighborhoods, the mansion tax affects a substantial share of all residential transactions.
The mansion tax was significantly reformed in 2019, changing from a flat one percent rate to a progressive structure with rates as high as 3.9 percent for the most expensive properties. Understanding how this tax works, how it is calculated, and how it interacts with your other closing costs is essential for any buyer in the New York City real estate market.
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What Is the Mansion Tax?
The mansion tax is a real estate transfer tax imposed on the buyer of residential property in New York State when the purchase price equals or exceeds one million dollars. In New York City, the tax uses a progressive rate structure that was introduced in 2019 as part of the state budget. The tax is paid by the buyer at closing and is in addition to the seller's transfer taxes and all other buyer closing costs. Use our buyer closing cost calculator to estimate your total costs including mansion tax.
It is important to understand that the mansion tax applies to the entire purchase price, not just the amount above one million dollars. This creates a significant cliff effect: a property purchased for nine hundred ninety-nine thousand nine hundred ninety-nine dollars incurs no mansion tax, while a property purchased for one million dollars triggers a tax of ten thousand dollars. This cliff effect influences pricing strategy for both buyers and sellers, particularly for properties listed near the one-million-dollar threshold.
Mansion Tax Rate Schedule for NYC (2026)
| Purchase Price | Tax Rate | Tax on $X Million Purchase |
|---|---|---|
| Below $1,000,000 | 0% | $0 |
| $1,000,000 – $1,999,999 | 1.00% | $10,000 – $19,999 |
| $2,000,000 – $2,999,999 | 1.25% | $25,000 – $37,499 |
| $3,000,000 – $4,999,999 | 1.50% | $45,000 – $74,999 |
| $5,000,000 – $9,999,999 | 2.25% | $112,500 – $224,999 |
| $10,000,000 – $14,999,999 | 3.25% | $325,000 – $487,499 |
| $15,000,000 – $19,999,999 | 3.50% | $525,000 – $699,999 |
| $20,000,000 – $24,999,999 | 3.75% | $750,000 – $937,499 |
| $25,000,000+ | 3.90% | $975,000+ |
As the table shows, the mansion tax can be a very substantial expense for higher-priced properties. A buyer purchasing a five-million-dollar apartment in Manhattan will owe one hundred twelve thousand five hundred dollars in mansion tax alone, on top of all other closing costs.
How the Mansion Tax Is Calculated
The mansion tax is calculated by multiplying the total purchase price by the applicable rate for the price bracket. Unlike a graduated income tax where different portions of income are taxed at different rates, the mansion tax applies the single applicable rate to the entire purchase price. This means the tax jumps at each threshold rather than gradually increasing.
Example Calculation: A buyer purchasing a condo for $2,500,000 would owe: $2,500,000 × 1.25% = $31,250 in mansion tax. If the same buyer purchased the property for $2,999,999, the mansion tax would be $37,499.99. But if the purchase price were $3,000,000, the rate jumps to 1.50%, making the tax $45,000—a $7,500 increase for just one additional dollar in purchase price.
Who Pays the Mansion Tax?
The mansion tax is paid by the buyer. This is one of the few transfer taxes in NYC that falls on the buyer's side of the transaction. The seller is responsible for the separate NYC transfer tax and NYS transfer tax, but the mansion tax is the buyer's obligation. In some cases, buyers may negotiate with the seller to receive a credit toward the mansion tax as part of the purchase negotiation, but this is not standard practice and depends on market conditions and leverage.
Which Properties Are Subject to the Mansion Tax?
The mansion tax applies to all residential real property transactions in New York State where the purchase price is one million dollars or more. In New York City, this includes co-op apartments, condominium apartments, townhouses, single-family homes, and multi-family residential properties. The tax applies regardless of whether the buyer is financing the purchase or paying cash, and regardless of whether the property is a primary residence or an investment property.
Commercial properties are not subject to the residential mansion tax, though they may be subject to other transfer taxes. Mixed-use properties where the residential component meets the threshold may trigger the tax on the residential portion of the transaction.
The Million-Dollar Threshold: Pricing Strategy Implications
The mansion tax's cliff effect at the one-million-dollar threshold creates unique pricing dynamics in the NYC real estate market. Sellers listing properties near the threshold often price strategically to either stay below one million dollars or to price high enough above it that the mansion tax is justified by the property's value.
Buyers should be aware of this dynamic when making offers on properties listed near the threshold. A property listed at one million fifty thousand dollars carries a mansion tax of ten thousand five hundred dollars. If the buyer can negotiate the price down to nine hundred ninety-nine thousand dollars, the mansion tax is eliminated entirely, providing an effective savings of roughly ten thousand dollars on top of the fifty-one thousand dollar price reduction.
For properties well above the threshold, the cliff effects at higher brackets can also influence negotiations. A property at two million nine hundred thousand dollars versus three million dollars represents a seven thousand five hundred dollar difference in mansion tax, in addition to the one hundred thousand dollar difference in purchase price.
Mansion Tax and New Development Purchases
Buyers of new development or sponsor units are subject to the mansion tax just like buyers of resale properties. However, new development purchases already carry significantly higher buyer closing costs because the buyer typically pays the seller's transfer taxes and the sponsor's attorney fees. Adding the mansion tax on top of these costs means new development buyers at the one-million-dollar threshold and above face particularly high total closing costs.
For this reason, some new development sponsors offer closing cost credits or other incentives to offset the mansion tax and other buyer expenses. These incentives are more common in softer market conditions and are always worth asking about during negotiations.
How the NYC Mansion Tax Compares to Other Jurisdictions
New York City's mansion tax is among the highest in the nation, but it is not unique. New Jersey imposes a mansion tax of one percent on residential transactions exceeding one million dollars, making it a relevant comparison for buyers considering properties on both sides of the Hudson River. Connecticut has a similar conveyance tax surcharge for higher-priced properties. However, New York City's progressive rate structure, with rates reaching 3.9 percent at the top end, is significantly more aggressive than the flat-rate mansion taxes imposed by most other jurisdictions.
For buyers considering properties in both NYC and the surrounding suburbs, the mansion tax differential can be a meaningful factor in the purchasing decision. A buyer choosing between a two-million-dollar condo in Manhattan and a two-million-dollar home in Bergen County, New Jersey, would pay twenty-five thousand dollars in mansion tax in NYC versus twenty thousand dollars in New Jersey. While the difference at this price point is relatively modest, it grows substantially at higher price levels due to NYC's progressive rate structure.
Mansion Tax and Investment Properties
The mansion tax applies equally to primary residences and investment properties. There is no exemption for properties purchased as rental investments, vacation homes, or pieds-a-terre. Investors purchasing multiple properties each face the mansion tax on every individual transaction that meets the threshold. For real estate investors building a portfolio of NYC properties, the cumulative mansion tax exposure across multiple acquisitions can be substantial and must be factored into the investment return analysis.
Unlike the seller's transfer taxes, which may in some cases be deductible as selling expenses, the mansion tax paid by the buyer is generally added to the cost basis of the property. This means it reduces your taxable capital gain when you eventually sell the property, but it does not provide an immediate tax benefit at the time of purchase. Consult with a tax professional to understand how the mansion tax interacts with your overall tax planning strategy.
History of the NYC Mansion Tax
The mansion tax was originally introduced in New York in 1989 as a flat one percent tax on residential purchases of one million dollars or more. At the time, one million dollars was a far higher threshold relative to home prices, and the tax truly affected only the most expensive properties. Over the decades, as home prices in New York City increased dramatically, the tax began affecting a much larger share of ordinary residential transactions. The threshold was never adjusted for inflation.
In 2019, the state legislature reformed the mansion tax by introducing the current progressive rate structure. While the one percent rate at the one-million-dollar threshold remained unchanged, higher rates were added for progressively more expensive properties, with the top rate of 3.9 percent applying to purchases of twenty-five million dollars and above. The revenue from the higher brackets was directed toward funding improvements to the Metropolitan Transportation Authority and affordable housing programs.
Practical Tips for Buyers Navigating the Mansion Tax
There are several practical steps buyers can take to navigate the mansion tax effectively. First, understand the cliff effects at each rate bracket and factor them into your offer strategy. If you are considering two properties at similar prices, the one priced just below a bracket threshold could save you thousands in mansion tax compared to the one priced just above it. Second, ask your real estate attorney to prepare a comprehensive closing cost estimate that includes the exact mansion tax amount early in the process so there are no surprises. Third, if you are purchasing a new development unit, explore whether the sponsor is willing to offer closing cost credits or other incentives that can help offset the mansion tax. Fourth, for buyers considering properties in both New York City and surrounding areas like New Jersey, Westchester, or Long Island, compare the total transfer tax burden including the mansion tax across different jurisdictions as part of your decision-making process.
For investors purchasing multiple properties, consider the cumulative impact of the mansion tax across your portfolio. Each acquisition above one million dollars triggers a separate mansion tax obligation, and the aggregate cost across multiple transactions can be substantial. Proper financial planning and careful property selection can help manage this exposure over time. Working with a real estate attorney who understands these dynamics and can model different scenarios for you is invaluable.
Frequently Asked Questions
Does the mansion tax apply to co-ops?
Yes. The mansion tax applies to co-op purchases of one million dollars or more, just as it applies to condos, townhouses, and single-family homes.
Is the mansion tax deductible?
The mansion tax is generally not deductible as a separate line item on your federal tax return. However, it may be added to your cost basis in the property, which could reduce your capital gains tax when you eventually sell. Consult with a tax professional for advice specific to your situation.
Can I avoid the mansion tax?
The only way to avoid the mansion tax is to purchase a property for less than one million dollars. There are no exemptions for first-time buyers, primary residences, or specific property types.
When is the mansion tax paid?
The mansion tax is paid at closing. Your attorney will ensure the correct amount is included in the closing statement and that the tax is properly remitted.
How Agarunov Law Firm Can Help
At Agarunov Law Firm, our real estate attorneys help NYC buyers navigate the full range of closing costs, including the mansion tax. We provide accurate closing cost estimates early in the process so you can budget effectively, negotiate strategically around tax thresholds, and understand exactly what you will owe at closing. Whether you are purchasing a co-op in Brooklyn, a condo in Manhattan, or a townhouse in Queens, we are here to protect your interests. Contact us for a free consultation.
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