New Yorkers who own real estate — even a single townhouse — might be headed over a cliff.
I’m talking about the estate tax.
If a New Yorker with a net worth of up to $7,717,500 dies in 2026, the first $7.35 million is not taxed by the state. But if an estate is worth more than 5 percent above that exclusion threshold, the entire estate is taxed.
Tax professionals call that a cliff.
New York’s estate tax rate starts at 3.06 percent and rises quickly, topping out at 16 percent for estates worth more than $17.25 million. People worth that much have likely done some estate planning, or at least thought about it.
It’s New Yorkers who don’t consider themselves wealthy, but who have had a home and a 401(k) for a while, who tend to be shocked when they realize how the state will tax what they leave behind.
The impact of going over the precipice is severe. At the edge of the cliff, a $7,717,500 estate would pay a tax of just $49,980 — only 0.6 percent. An estate worth $1 more than that is over the cliff and would pay $734,580 — a hefty 9.5 percent. The difference between those two tax bills is $684,600.
From a policy perspective, how does it make any sense that dying with a single extra dollar would cost your heirs $684,600? Perhaps state lawmakers really want to motivate New Yorkers to reduce their net worth.
(There is no federal estate tax cliff. Plus, the federal exemption amount is absurdly high. An individual who dies with $14 million pays no federal estate tax.)
If you live in an $8 million townhouse with no mortgage, avoiding the cliff will be difficult. You could sell or mortgage the house and give away some of the money, but be warned that non-charitable gifts made within three years of your death will be clawed back into your estate by Albany.
Another option is to donate your home to charity with a life estate, meaning you can keep living there until you die, at which point the charity gets it. This immediately removes the home from your estate and also provides an instant income tax deduction that can be carried forward as needed.
Donating the house also guarantees that your heirs won’t fight over it when you’re gone. But that kind of thing never happens, right?
What we’re thinking about: If COPA (Community Opportunity to Purchase Act) passes and nonprofits buy a bunch of apartment buildings, the buildings would no longer have to pay property taxes. Has anyone mentioned the potential impact of the bill on city revenue?
A thing we’ve learned: The city does not allow buildings’ lighting — such as that on JPMorgan Chase’s new skyscraper at 270 Park Avenue — to display advertising or company branding.
Elsewhere…
Two landmarked buildings are close enough to Extell Development’s project at 655 Madison Avenue to sell air rights to it: 781 and 790 Fifth Avenue.
But only 790 Fifth can do so, says PropertyScout CEO Wilson Parry, because 781 Fifth — the Sherry-Netherland co-op — is overbuilt. It has been there since 1927.
Barnett is also getting 129,000 square feet of development rights in return for making improvements to the Fifth Avenue/59th Street subway station. Those improvements will benefit his building and the public at large.
Closing time
Residential: The top residential deal recorded Tuesday was $7.3 million for a 2,488-square-foot, sponsor-sale condominium at 50 West 66th Street in Lincoln Square.
Commercial: The top commercial deal recorded was $4.2 million for a 13-unit apartment building at 2923 Frederick Douglass Boulevard in Central Harlem.
New to the Market: The highest price for a residential property hitting the market was $27 million for a 5,475-square-foot condominium unit at 157 West 57th Street in Midtown. Nile Lundgren of Serhant has the listing.
Breaking Ground: The largest new building permit filed was for a proposed 64,675-square-foot, 74-unit project at 191 Canal/17 Cedar Street in Stapleton. Lester Katz filed the permit on behalf of Zeldy Roth.
— Matthew Elo