NYC Mansion Tax: Who Actually Pays It, Buyer or Seller?

When purchasing high-end real estate in New York, two major taxes often cause confusion: the Mansion Tax and the Real Estate Transfer Tax (RETT). Understanding who is legally responsible for each is crucial for navigating your closing costs.

Who Pays the Mansion Tax?

Under New York Tax Law Section 1402-a, the Buyer (Grantee) is legally responsible for paying the Mansion Tax. This tax applies to residential purchases of $1 million or more in New York State. The rates are progressive, starting at 1% for properties between $1 million and $1.99 million, and climbing up to 3.9% for properties valued at $25 million or more.

Because the buyer bears this cost, it significantly increases the amount of cash required at closing. For a $2 million condo in Manhattan, the buyer must bring an additional $25,000 just for this tax.

Who Pays the NYS Transfer Tax?

Conversely, under New York Tax Law Section 1402, the Seller (Grantor) is legally responsible for paying the New York State Real Estate Transfer Tax, as well as the local New York City Real Property Transfer Tax (RPTT).

Negotiations and "Grossing Up"

While the statutory liability dictates who owes the state, the economic burden is sometimes shifted during contract negotiations. In new developments (sponsor sales), it is standard industry practice for the sponsor to require the buyer to pay the seller's Transfer Taxes. When a buyer pays a tax legally owed by the seller, New York State considers this additional consideration. The taxable amount must be "grossed up" — meaning the tax amount is added to the purchase price to calculate the final tax owed.

For buyers nearing the $1 million threshold, it is also common to negotiate the purchase price down slightly (e.g., to $999,000) to legally avoid triggering the Mansion Tax "cliff."

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Disclaimer: The information provided in this guide is for educational purposes only and does not constitute legal or tax advice. Please consult with a qualified real estate attorney or tax professional regarding your specific transaction.