Permanent Property Tax Cap of 2%
The budget’s revenue bill includes a permanent cap of 2% on property tax increases, an issue championed especially down state by Cuomo to mitigate the effects of the $10,000 cap on the state and local tax deduction under the federal Tax Cuts and Jobs Act. The Governor had pledged not to sign a budget without a permanent property tax cap. “The permanent property tax cap, because that is directly related to SALT and the instability of New York citizens, and taxpayers and homeowners that was a top priority, still is a top priority,” Cuomo said in his remarks regarding the budget March 29. The Senate had endorsed the Governor’s proposal for a permanent property tax cap in its fiscal 2020 plan, but until that final vote, the Assembly had stopped short of agreeing with a permanent cap.
No Pied-à-Terre Tax
As originally proposed, Senate Bill S.44, would have created a sliding scale pied-a-terre tax surcharge: For properties valued between $5 million and $6 million, a 0.5% surcharge would be added on the value over $5 million. Fees and a higher surcharge would apply to homes that sold for more than $6 million, topping out at a $370,000 fee and a 4% surcharge for homes valued at more than $25 million. Stressing that this is an additional tax, the bill excluded vacant land, but covered real property that has a market value of $5 million dollars or higher and [that] is not the primary residence of the owner or owners of such property, or not the primary residence of the parent or child of such owner or owners. However, the pied-a-terre tax proposal is dead.
In its place is a progressive “mansion tax” on luxury real estate that is usually paid by the purchaser. The new rates go into effect on July 1, 2019. The mansion tax establishes a new scale of graduated levies. The Final Bill imposes additional real property transfer taxes, at $1.50 per $500 of sales price, applicable to residential properties valued at more than $3 million and non-residential properties valued at more than $2 million in New York City. The budget also imposes an additional supplemental real property transfer tax on residential properties in New York City valued at over $2 million, which tops out at 2.9% for properties sold for more than $25 million. While Robert Mujica, Gov. Cuomo’s budget director, recently floated with WMAC radio the idea of a pied-à-terre tax to pay for the Big Apple’s public transportation system, apparently “This structure promotes tax administration efficiency, raising $365 million from high-end property transfers that will be deposited into the MTA's Central Business District tolling capital lockbox and will be used to support up to $5 billion in financing for MTA projects,” according to Cuomo’s remarks in his budget press release.
