Thinking about buying in SoHo and wondering how the “mansion tax” might affect you? You are not alone. Once your purchase price reaches seven figures, a separate state surtax can change your cash needed at closing. In this guide, you will learn what triggers the tax, how it fits alongside other NYC closing costs, and smart ways to structure your offer so you are not surprised on closing day. Let’s dive in.
What the mansion tax is
The New York State “mansion tax” is a real estate transfer surtax that applies when the purchase price for a residential property is at or above $1,000,000. It is calculated as a percentage of the purchase price and is due at closing. By statute, the purchaser is responsible for paying it, although you can negotiate allocations in your contract.
In SoHo, this applies to residential purchases across property types common in the neighborhood: condos, co-ops, and 1–3 family homes used as residences. Certain mixed-use properties may also be treated as residential for tax purposes if the residential component is being conveyed as such. Your attorney can confirm the correct classification.
When the tax applies in SoHo
If your accepted contract price is $1,000,000 or more, you should plan for the mansion tax. Lenders typically do not include this surtax in mortgage proceeds, so buyers usually pay it in cash at closing. The tax is based on the purchase price or total consideration. That means the way you structure concessions or upgrades in the contract can affect the taxable base.
Budgeting beyond the mansion tax
In New York City, buyers face several other taxes and fees at closing. Some are statutory, others are customary or building-specific. It helps to map out everything early.
NYC Real Property Transfer Tax (RPTT)
NYC imposes its own transfer tax under a separate schedule for residential versus commercial deals. It sits alongside the state mansion tax and can materially affect your cash due at closing. Rates and brackets can change, so your attorney or title company should confirm the current schedule before you sign a contract.
NY State Real Estate Transfer Tax (RETT)
This is a separate state transfer tax from the mansion surtax. It is typically billed as a line item on your closing statement. Allocation between buyer and seller depends on your contract and market norms.
Mortgage recording tax
If you finance your purchase, NYC and NY State impose mortgage recording taxes based on the loan amount and property type. This is in addition to lender fees and is paid in cash at closing. Schedules vary by amount and can change with legislation.
Title, attorney, and settlement costs
For condos and 1–3 family homes, title insurance is common and includes search, premium, and settlement charges. For co-ops, you are purchasing shares and a proprietary lease, so title insurance is less common, though some lenders may require related protections or searches. In all cases, you should budget for buyer-side attorney fees and recording or filing costs.
Building and administrative fees
Expect building-specific charges like condo or co-op application fees, move-in fees or deposits, managing agent fees, and prorations for common charges or maintenance. Co-ops may also impose a flip tax that can be a significant cost at sale. The proprietary lease and house rules will spell out who pays what.
A simple SoHo buyer checklist
Use this list to start your budget planning. Your specific numbers will come from your attorney, lender, and title company.
- Purchase price at or above $1,000,000: plan for the state mansion surtax at closing
- NYC Real Property Transfer Tax (RPTT): municipal transfer tax under its own schedule
- NY State Real Estate Transfer Tax (RETT): separate state transfer tax
- Mortgage recording tax: only if you finance the purchase
- Lender fees: application, appraisal, underwriting, and related charges
- Title policy and searches (condos and 1–3 family homes); co-op searches and related lender requirements
- Buyer’s attorney fees and settlement or escrow charges
- Recording and filing fees; condo or co-op application and managing agent fees
- Co-op flip tax or sponsor/seller transfer fees, if applicable
- Prorations for taxes, common charges, or maintenance
- Prepaid escrows for property taxes and insurance, if required by your lender
- Moving, immediate maintenance, and renovation costs
How offer structure affects your taxes
How you negotiate can change your taxable base and your cash needs at closing.
- Price reduction versus closing credit: A reduction in the contract price may reduce the base on which the mansion tax is calculated. A seller credit at closing typically does not reduce the contract price. Be explicit in your offer about the form of any concession and confirm the tax treatment with counsel.
- Allocation of closing costs: While statutory taxes have fixed rules, many other costs can be allocated in the contract. You can request seller-paid fees or a targeted credit. Sellers, however, will factor these into net price.
- Financing strategy: Since transfer taxes are often paid in cash at closing, model the impact on your liquidity. Ask your lender what, if anything, can be financed and what must be paid out of pocket.
Condo versus co-op considerations
SoHo has a mix of condos and co-ops, and the path to closing differs.
- Co-ops: You buy shares and receive a proprietary lease. Confirm board application requirements, timing, and any flip tax. Co-op approvals can lengthen timelines, which can add to carrying costs while you wait to close.
- Condos: Title insurance and recording are standard, and closings can be faster than co-ops. Expect standard searches, title and settlement fees, and building application steps.
In both cases, verify any assessments, capital contributions, or sponsor conditions before you go into contract.
Timeline and cashflow planning
The mansion tax, transfer taxes, and recording taxes are due at closing. That means you should set aside liquid funds in addition to your down payment. For co-ops, build in extra time for board approval and be ready for additional months of maintenance and mortgage interest if timelines extend. Staying ahead of document requests from your lender, attorney, and managing agent helps you avoid delays.
How to prepare with confidence
A clear budget and smart structure go a long way. Here is a simple plan:
- Confirm classification. Make sure your property will be treated as residential for tax purposes. Ask your attorney to confirm if mixed-use is involved.
- Build a full closing budget. Include the mansion tax, RPTT, RETT, mortgage recording tax if applicable, legal and title fees, and building charges.
- Choose your concession strategy. Decide whether to seek a price reduction or a closing credit and understand how each affects the mansion tax base.
- Align your cash. Verify how much must be paid in cash at closing and what your lender will and will not finance.
- Lock your timeline. For co-ops, plan for board timing and potential carrying costs. For condos, confirm any building sign-offs or estoppels needed.
When you work with a local team that understands SoHo buildings and Manhattan closing practices, you can anticipate line items, avoid surprises, and keep your leverage during negotiations.
Ready to run numbers for a specific SoHo property or compare condo and co-op scenarios side by side? Reach out to the team at Miller Schackman for clear guidance, from offer strategy to the closing table.
FAQs
What is the New York mansion tax for SoHo buyers?
- It is a New York State surtax due at closing on residential purchases at or above $1,000,000, calculated as a percentage of the purchase price.
Who pays the mansion tax in NYC residential deals?
- By statute the purchaser pays, though buyers and sellers can negotiate allocations in the contract as part of overall economics.
Does a seller credit reduce the mansion tax amount?
- A purchase price reduction may reduce the taxable base, while a credit at closing typically does not reduce the contract price; confirm with your attorney.
What other NYC taxes should I budget for besides the mansion tax?
- Expect the NYC Real Property Transfer Tax, the NY State Real Estate Transfer Tax, and a mortgage recording tax if you finance, plus legal and title costs.
Are co-ops treated differently than condos at closing?
- Yes, co-ops involve board approval, possible flip taxes, and different documentation, while condos typically use title insurance and standard recording.
Will my mortgage cover the mansion tax and transfer taxes?
- Lenders typically do not include these taxes in loan proceeds, so buyers should plan to pay them in cash at closing unless your lender confirms otherwise.
