A Comprehensive Guide to NYC Real Estate Taxes

By PropertyClub Team
May 2nd 2020
New Yorkers are among the most highly taxed people in America. Most already know that NYC is one of only a handful of cities to have an income tax, but what about real estate taxes in New York City? Well, if you're a property owner in the city, your tax burden is even greater. And to make matters worse, real estate taxes are only going up and increasing in number.

Life's Two Sure Things: Death and NYC Property Tax Increases

Over the past ten years, property taxes in New York City have gone up three times as faster than household incomes. These drastic increases are affecting every income group, from the wealthy to the poor, and it's low-income households that are getting hit hardest by higher property taxes. According to the New York City Comptroller's Office, from 2005 through 2015, the percentage of household income going to property taxes has almost doubled, increasing from 6.6% to a whopping 12.7%. According to the NYC Department of Finance, property taxes are the single largest source of revenue for the city. In 2016 they brought in over $26 billion to city coffers. No wonder they keep going up.

An Array of Additional Real Estate Taxes to Ruin Your Day

It's not just property taxes, with their ever-increasing rates, hitting property owners in New York City. City officials have come up with an array of additional real estate related taxes to suck every possible dollar out of a property owner's pockets. The lyrics to the 1960's Beatles song "Taxman" nicely captures how tax officials approach real estate taxes in the Big Apple:

If you drive a car, I'll tax the street

If you try to sit, I will tax the seat

If you get too cold, I'll tax the heat

If you talk a walk, I'll tax your feet

It seems to many that the tax authorities slap a tax on anything remotely relating to real estate. Here's a rundown of NYC's significant real estate related taxes:

NYC Transfer Tax

The NYC Transfer Tax was introduced back in 1959. In those days it was only 0.5% of the sales price. Today, the city applies a 1% tax on properties sold for less than $500,000. Properties that sell for more than $500,000 are subject to a 1.425% tax.

NYS Transfer Tax

The state of New York also applies a transfer tax on all properties. The New York State transfer tax is 0.4% for properties under $3 million and 0.65% for properties that sell for $3,000,000 or more. That means that when added to the NYC tax, all buyers in NYC will pay 1.4% for properties sold for less than $500,000 and 1.825% for homes that sell for $500,000 - $2,999,999 and 2.075% on properties selling for $3,000,000 or more. It's not really possible to avoid transfer taxes unless the property is sold for under $500. The best way to mitigate Transfer Taxes is to sell with a broker who charges less than the standard 6% fee, which is a fantastic way to alleviate all your NYC closing costs

Mansion Tax

With real estate prices rising ever higher in the past decade, the so-called Mansion Tax is no longer just for mansions. The NYC mansion tax was also just changed to become a progressive tax. What was originally a 1% tax on any condo, co-op, or house sold in New York City that went for $1 million or more, will now see rates as high as 3.9% for properties selling above $25 Million. If the sale was for $999,999, no tax is applied; however, if the price hits $1 million, the buyer will pay a $10,000 Mansion Tax. According to a recent study, the average price per square foot in Manhattan in 2018 was $1,773, meaning that a $1 million will only buy you a roughly 550 square foot studio apartment- hardly a mansion by any definition. And with prices rising in Brooklyn and Queens in recent years, the only remaining boroughs in NYC where a million bucks could get you a mansion are Staten Island and the Bronx. 

Mortgage Recording Tax aka Mortgage Tax

The mortgage recording tax is yet another way for the government to pick your pocket. Most people have to get a mortgage to buy their home. Few pay all cash. Consequently, the vast majority of New York City real estate buyers will be hit up for an additional 2.175% City Mortgage Tax. New York State takes a bite of this apple as well as they apply a 0.5% mortgage tax to new purchases. You'll even have to pay the mortgage tax if you refinance unless you opt for a CEMA loan. 

Flip Tax

If the government hasn't already rung you dry, your co-op or condo board certainly might. They often apply a flip tax, also called a transfer fee (especially in the case of condos), when a unit is sold. The amount differs from building to building and is far more common in co-ops. In lieu of a flip tax or transfer fee, which is typically paid by the seller, many condos (and some co-ops) may charge the buyer a capital contribution fee.