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

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