The New York Mansion Tax
was instituted in 1989 by Governor Cuomo in 1989.
It was designed to be a surcharge
for the wealthy. Of course back in '89, a million
dollars really did purchase a mansion; but now with
today's inflation, we have changed how we look at a
million dollars. New York Tax Law, Section 1402-a,
imposes a 1% tax upon the buyer in the purchase of
residential one, two or three family homes (including
condominium or cooperative units).
There is a little catch for
today's buyers. If the Buyer is paying the
transfer tax at closing, this cost is ADDED to the
purchase price. If that addition exceeds the
million dollar mark, then the mansion tax is owed.
So selling at $999,000 won't always work for the buyer!
By law, the buyer pays the
transfer tax; but the purchase contract can state
otherwise. Should the seller, agree to pay the
transfer tax, then the sale's price for the buyer will
not be reduced by the amount of tax paid for purpose of
figuring the capital gains tax and real estate property
There is good news, however.
The mansion tax is considered part of the property's
basis for calculating capital gains tax. For
example: The buyer later sells his million dollar
property for two million. He and his wife
purchased it for a million dollars, did upgrade features
of $400K (not repairs), and had a $100K mansion tax applied at the
time of purchase. They can now adjust their
basis of $2M sale less $1M it costs, less the $400K,
less the $100K mansion to equal at capital gain of only
$500K. Also, note if they lived at the
property as a primary residence for over two years, they
are exempt from capital gains up to $500K married, or
$250K single. (more on capital gains on home sales)
Did you inherit or was gifted a
mansion? No mansion tax applies.
Are you buying a property that
includes furniture in the sale? Perhaps think
about making the sale of the future as a personal
property sale. Paying a sales tax instead of
a mansion tax, might be beneficiation.
No, the mansion tax is not
deductible on the buyers' federal income tax returns.
ALWAYS, check with your CPA/Accountant
to make the wisest choice when purchasing.
Estate Transfer Tax
State imposes a real estate transfer
tax on conveyances of real property
or interests therein when the
consideration exceeds $500.
computed at a rate of two dollars
for each $500, or fractional part
thereof, of consideration.
additional real estate transfer tax
(sometimes referred to as the
"mansion tax") of 1% of the sale
price applies to residences where
consideration is $1 million or more.
pays the tax
The tax is
paid by the grantor (seller).
However, if the grantor doesn't pay
the tax, or is exempt from the tax,
the grantee (buyer) must pay the
additional 1% real estate transfer
tax is paid by the grantee. If the
grantee is exempt, the grantor must
pay the tax.
and pay tax
Nonresident filing requirements
must compute the gain (or loss) and pay
any estimated personal income tax due
from the sale or transfer of certain
real property, including cooperative
units. Nonresidents who don't qualify
under one of the exemptions shown on
Form TP-584, Schedule D must present one
of the following forms to the recording
officer or directly to the Tax
Department at the same time Form TP 584
Exclusions of Capital Gains Tax
Exclusion on the Sale of a Primary
can exclude up to $250,000 in profit
from the sale of a main home, or
$500,000 married, as long as you
have owned and lived in the home for
a minimum of two (2) years.
The two years do not need to be
consecutive. In the 5 years
prior to the sale of the house, you
need to have lived in the house for
at least 24 months in that 5-year
You can use
this 2-out-of-5 year rule to exclude
your profits each time you sell or
exchange your main home. Generally,
you can claim the exclusion only
once every two years. Some
exceptions do apply. An
example of an exception might be
selling your home because of job
relocation, health concerns or other
unforeseen issues. You may be
able to exclude a portion of the
gain for those qualify exemptions (see
IRS Pub 525,
Selling Your Home).
Remember, ALWAYS check with your qualified
(Main home can be duplex, condo,
boat or mobile home; as long as it
has eating, sleeping & toilet
Section 1031 of the
Internal Revenue code provides that no loss or gain can be
recognized on the exchange of property held for productive use in a
trade or a business, or for an investment. A 1031 exchange
allows a property owner to trade one, or more, properties for one,
or more, replacement properties of "like-kind" and defer the payment of federal
income taxes and in some state taxes until the property is eventually sold
outside of an exchange. To learn more about 1031 "Like Kind"
Exchange visit our article (click
2013's New 3.8% Tax
2013 brings in a new tax on net
investment income for couples with adjusted gross income
above $250,000 (or $200,000 for singles). This tax
can apply to gains from a sale of a home. In cases
where the gain is greater than the home's cost, plus
improvements, plus the $250,000/$500,000 break, the tax
will affect only the amount above the benefit; but
capital losses can be used to offset such gains, if they
When the mortgage lender forgives
the mortgage debt, ordinarily the amount forgiven is
treated as taxable income. In 2007, the government
exempted up to $2 million of forgiven debt per taxpayer.
The exemption lasts through 2013. Taxpayers can claim it
IRS Form 982.
A few exceptions do apply.
Articles of Interest
information provided above is provided for general
entertainment use only and ACHR is not a qualified
accountant or CPA. Before making any decisions on
your tax issues, always contact a qualified
accountant/CPA. ACHR is not
responsible for any tax decisions you render from our