New Yorkers Could Face a New Tax on Homes Bought With Cash Over $1M

New York state lawmakers are drafting a budget proposal that targets real estate, including a new one-percent tax on all-cash home purchases above $1 million, Bloomberg reported.

Under current rules, buyers with a mortgage pay a one-time state tax at closing, while cash buyers are exempt. The proposed change would eliminate that gap, requiring all-cash purchasers in excess of $1 million to pay the same levy. Officials estimate it could generate about $160 million in New York City alone, with discussions underway to extend it to the suburbs, the Hamptons, and the Hudson Valley. The move could significantly impact the market, as data from the nonprofit Center for New York City Neighborhoods shows cash deals recently accounted for 60 percent of city sales and nine out of ten transactions above $3 million.

Lawmakers are also pushing a so-called pied-à-terre tax on New York City properties valued at $5 million or more that are not used as a primary residence. Backed by Governor Kathy Hochul and Mayor Zohran Mamdani, the annual surcharge targets part-time residents who benefit from rising property values but do not contribute to local economic activity through day-to-day spending. Hochul recently shared new details, explaining that rates would vary by property type, with condos and co-ops initially placed on a separate sliding scale to reflect how the city assesses different kinds of apartments.

New York is considering a new tax on all-cash real estate purchases over $1 million.

Orjan F. Ellingvag/Corbis via Getty Images

Homeowners would pay the surcharge on top of their standard property taxes as the city develops a new valuation system over the next two years. State officials estimate roughly 10,000 properties would qualify, potentially generating $500 million annually to help narrow the city’s budget deficit.

Despite these tax headwinds, New York’s luxury market shows little sign of slowing. The Hollywood Reporter notes that the state had the nation’s top-performing housing market, according to the Federal Reserve, with rising sales across condos, townhouses, and co-ops. Brokerage data cited in the report suggests the wealth of the top one percent has ballooned to more than $50 trillion from $31 trillion in 2020, keeping demand for high-end properties strong.

Developers and real estate groups warn, however, that taxing large properties could have some messy side effects, pointing to Los Angeles and its mansion tax. The policy extended beyond ultra-luxury estates to include apartment buildings as well, which, the Wall Street Journal reported, scared off investors and caused new apartment construction to tank by 46 percent. 

As New York wraps up its budget debates, the key question is whether luxury buyers will shrug and absorb the added costs or take their money and home shop in other states. So far, they’re sticking with the Big Apple.

Authors

Abby Montanez

Abigail Montanez is a staff writer at Robb Report. She has worked in both print and digital publishing for over half a decade, covering everything from real estate, entertainment, dining, travel to…

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