Eyeing a SoHo condo and wondering why your closing estimate suddenly jumped? You are not alone. Many buyers are surprised by New York’s “mansion tax” and how it changes the cash you need to close. In this guide, you will learn exactly what the tax is, who pays it, how rates work, and how to plan your offer to avoid costly surprises. Let’s dive in.
What the mansion tax is
The mansion tax is a New York State real estate transfer tax that applies when the purchase price of a residential property is $1,000,000 or more. It is commonly called the mansion tax, but it is a state transfer tax, not a separate city tax. In SoHo, it typically applies to condos and co‑ops because most purchases exceed $1,000,000.
The tax is separate from other transfer and recording taxes. You should plan for the mansion tax in addition to New York State and New York City transfer taxes and any mortgage recording tax that applies.
Who pays and when
By law, the buyer pays the mansion tax. It is normally collected at closing and will appear as a line item on your closing statement. The title company or your closing attorney usually handles collection and remittance at the table.
If your transaction is structured in a non‑standard way, such as a sale of an LLC interest or an assignment, the tax treatment can differ. Work with your real estate attorney to confirm how your structure will be treated before you sign a contract.
Rates at a glance
The mansion tax is applied as a percentage of the entire purchase price once you cross a bracket. It is not marginal. Crossing a threshold applies the higher rate to the full price, which creates a cliff effect near each bracket. Rates below are for residential purchases of $1,000,000 or more and are current as of June 2024.
- $1,000,000 to $1,999,999: 1.00%
- $2,000,000 to $2,999,999: 1.25%
- $3,000,000 to $4,999,999: 1.50%
- $5,000,000 to $9,999,999: 2.25%
- $10,000,000 to $14,999,999: 3.25%
- $15,000,000 to $19,999,999: 3.50%
- $20,000,000 to $24,999,999: 3.75%
- $25,000,000 and above: 3.90%
SoHo examples you can use
SoHo price points commonly fall into higher brackets, so a small shift in price can change the tax meaningfully. Here are sample calculations that reflect typical SoHo ranges:
- $1,000,000 at 1.00% = $10,000
- $1,500,000 at 1.00% = $15,000
- $1,999,999 at 1.00% = ~$20,000
- $2,000,000 at 1.25% = $25,000 (a $5,000 jump vs $1,999,999)
- $2,500,000 at 1.25% = $31,250
- $3,000,000 at 1.50% = $45,000
- $4,999,999 at 1.50% ≈ $75,000
- $5,000,000 at 2.25% = $112,500 (a large cliff)
- $7,500,000 at 2.25% = $168,750
- $10,000,000 at 3.25% = $325,000
- $25,000,000 at 3.90% = $975,000
Cliff comparison examples
- Moving from $1,999,999 to $2,000,000 increases the tax from about $20,000 to $25,000, which is a $5,000 difference.
- Moving from $4,999,999 to $5,000,000 increases the tax from about $75,000 to $112,500, which is a $37,500 difference.
How it affects your cash to close
The mansion tax increases your cash needed at closing. Do not blend it with your down payment. Budget it as a separate line item along with attorney fees, title insurance, lender costs, and any city or state transfer and recording taxes.
Simple planning example
- Price: $3,000,000 condo
- Down payment: 20% = $600,000
- Mansion tax at 1.50%: $45,000
- Cash to bring for these items alone: about $645,000 (plus other closing costs)
This tax does not change your monthly mortgage payment unless your lender allows it to be financed. Many lenders expect taxes like this to be paid in cash at closing. Confirm this early so you can calibrate your offer and down payment strategy.
Offer strategy around price cliffs
Because the higher rate applies to the entire purchase price once you cross a bracket, price positioning can matter.
- If you are near a threshold, consider whether offering just under it meaningfully reduces your tax. For example, $1,999,999 vs $2,000,000 saves $5,000 of tax.
- At the $5,000,000 threshold, the cliff is larger. A price of $4,990,000 leads to about $74,850 of tax at 1.50%. At $5,000,000, the tax is $112,500 at 2.25%. That is a difference of roughly $37,650.
- Sellers weigh net proceeds and market strength. A small price reduction may not be acceptable in a competitive listing environment. Run the numbers before you decide whether to target a lower bracket or pursue other concessions.
Who pays in practice
By statute, the buyer pays. Buyers sometimes request seller credits or closing concessions to offset the tax, but seller absorption of mansion tax is uncommon unless negotiated into the price or the market favors buyers. If you plan to ask for a credit, state the exact dollar amount in your offer paperwork so the seller can evaluate net proceeds clearly.
Financing and lender considerations
The mansion tax is usually paid at closing from buyer funds. Whether any portion can be financed depends on the lender and loan program. Many lenders do not allow transfer taxes to be rolled into the loan amount, and they expect you to bring those funds in cash.
- Get pre‑approved before you make an aggressive offer in SoHo.
- Ask your lender to outline the full cash requirement to close, including down payment, mansion tax, and other closing costs.
- If you are trying to conserve cash, discuss whether reducing the down payment affects underwriting and monthly payment more than the tax itself.
Your action plan before you offer
Use this checklist to avoid surprises and keep your SoHo search focused:
- Run total cash to close for two or three price points near likely brackets.
- Confirm with your lender whether transfer taxes can be financed or must be paid in cash.
- Prepare alternate offer figures just below and just above key thresholds, then compare the tax and seller net side by side.
- If you plan to request a seller credit, include the precise tax dollar amount in your offer terms.
- For condos versus co‑ops, and for entity purchases, confirm tax treatment with your attorney before you sign.
What to know about structure and exemptions
Most standard condo and co‑op purchases over $1,000,000 in SoHo will incur the mansion tax. If your transaction involves an entity purchase, an assignment, or a sale of membership interests, the tax consequences can change. Exemptions or credits are not generally available for typical residential deals over $1,000,000. Always verify specifics with your counsel and closing team.
Put local expertise to work
A clear plan removes stress. When you understand the rates, the cliff effect, and how your lender treats closing costs, you can write confident offers and protect your cash position. If you want a second set of eyes on your numbers, an advisor who negotiates every day in Manhattan can help you structure the right strategy for SoHo.
Have questions about a specific property or bracket scenario? Reach out to Lena Simpson for a personalized consultation and a custom cash‑to‑close breakdown for your next SoHo purchase.
FAQs
What is the NYC mansion tax for SoHo purchases?
- It is a New York State transfer tax on residential purchases of $1,000,000 or more, applied to the entire purchase price at a rate that depends on your price bracket.
Who pays the mansion tax in New York City?
- The buyer is responsible, and it is typically collected by the title company or closing attorney at closing.
When is the mansion tax due for a SoHo condo or co‑op?
- It is due and payable at closing and appears as a line item on your closing statement.
How are mansion tax rates calculated in NYC?
- Once your price crosses a bracket, the higher percentage applies to the whole price, not just the amount over the threshold. This creates a cliff effect near each bracket.
Can I finance the mansion tax on a SoHo purchase?
- It depends on your lender and loan program, but many lenders require transfer taxes to be paid in cash at closing. Confirm early in the process.
Does the mansion tax apply to co‑ops in Manhattan?
- Generally yes for residential transfers, but final treatment depends on deal structure. Confirm with your attorney and closing team.
Are there exemptions or credits for SoHo buyers?
- Not generally for standard residential purchases over $1,000,000. Your counsel can advise on any unusual situations.
