What is a Mansion Tax and can I avoid it?
Most residential properties in central and western NYS sell for well under a million dollars. There are some that do hit that mark though. Lake homes, luxury homes and other special properties can easily hit $1MM.
If you are considering purchasing a property at the million-dollar level, there is something you should know…NYS gets a slice. NYS has a one-time tax on the purchase of a home at a million dollars or more. It’s called a “mansion tax”. That tax is equal to 1% of the purchase price. That equates to $10,000 at the million-dollar mark. The tax on two million dollars equals $20,000…
Options if you are at or near this level:
- Negotiate a purchase price under $1,000,000. A purchase at $999,000 while only $1,000 under a million dollars will be $11,000 cheaper than a purchase at $1,000,000 because there will not be a mansion tax.
- Separate personal property from your purchase contract and pay for it separately. Be careful with this option. The value of the personal property must be realistic. A refrigerator is not worth twenty thousand dollars. If though, you are purchasing items like, hot tubs, boats, non-permanent docs, tractors, etc., you can pay separately for these to help control of the cost of the real estate purchase. These items are likely to be due for a sales tax though, so that can eat into your mansion tax savings.
- Get out your checkbook – This is the most likely scenario. If you are purchasing a home at this level, more likely than not the purchase price will not fall in that short range where getting your purchase price under a million is an option. You are going to need to pay the tax. Welcome to NYS! In fairness, $1,000,000 can buy you a very special property in this part of the state. Downstate, the mansion tax is higher. Pay the tax and enjoy the beauty of what this part of NYS has to offer.
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