NYC’s Wealthy Home Buyers Rush to Avoid Mansion Tax Hike
With some of the most expensive real estate in the country, New York has no shortage of high-priced homes on the market. Although the average New Yorker will settle for a decent sized apartment in a nice neighborhood, many of the city’s upper-class millionaires will spare no expense when purchasing a home in the Big Apple. With the city set to roll out a higher tax rate on these multimillion-dollar mansions July 1st, it’s no surprise that home buyers and real estate agents alike are rushing to close their transactions.
This “mansion tax” will become staggered as opposed to a blanket rate of 1% on sales over $1 million. The updated law will keep the 1% rate for the $1-2 million range but will now mandate 1.25% on deals over $2 million and 3.9% on deals over $25 million. This increase marks a significant impact on home buyers in the market, considering the price tag on many desirable homes in the area are worth well over $2 million. New York officials have attempted to appease those affected by ensuring that the funds collected from the increase will go towards helping the community. The proposed plan will use the estimated additional $365 million a year to repair and revive the city’s subway systems.
In response to the news, the New York real estate community has seen a rise in deal closures as the deadline looms. Experts have said that the tax change hasn’t drawn in a massive number of new buyers but has changed the attitudes of those who were in the market to buy. In the past year, many believed potential residents were leaning towards renting over buying in such a tight market illustrated in the 6% decrease in deal closures. June is expected to be a good sales month as buyers rush to avoid the new tax, and it will be interesting to see how the overall sales data will be affected the rest of the year. In several cases, contracts are even being structured to include repercussions for the seller if the sale is delayed past the June 28th deadline.
In any major transaction, consulting with tax experts is one way individuals can educate themselves on policy changes and learn how their life decisions may impact their tax situation.
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