The Real Deal New York

Mansion tax could keep home prices under $1.75M

IBO report predicts de Blasio’s proposed law could influence sellers

June 01, 2015 04:50PM

Ronnie Lowenstein and 113 East 70th Street on the Upper East Side

Ronnie Lowenstein and 113 East 70th Street

Mayor Bill de Blasio’s proposed mansion tax could influence home sellers to keep their prices under $1.75 million for fear of discouraging buyers with the tax hike above that threshold, according to a new report by the Independent Budget Office.

De Blasio proposed the tax last month in conjunction with his 421a plan. New York state and the city already have a mansion tax of 2.825 percent on purchases over $1 million, Crain’s reported. The proposal would tax an additional 1 percent on purchases over $1.75 million and 1.5 percent on any portion of the price exceeding $5 million.

The monitor found that a homebuyer making a $1.75 million purchase would pay $49,437.50 in taxes, while for a $1.76 million purchase they would pay $67,320. A $10,000 price differential would result in a $17,882 bump in taxes, which could induce home sellers to stay under the $1.75 million line, justifying brokers’ fears.

Properties over $5 million would not be as seriously affected because the tax is only on the amount over $5 million. [Crain’s] — Tess Hofmann