NYC Real Estate Tax & Closing Cost Guide: Everything Buyers and Sellers Pay in 2026
- Corey Cohen
- 3 days ago
- 22 min read
A Roebling Report pillar guide. May 2026. By Corey Cohen, Principal of The Roebling Team at Compass.
→ Use the NYC Mansion Tax Calculator to model your transaction stack on any Manhattan purchase — flat-rate cliff math, with cliff warnings near each threshold.
New York City has the most complex residential transaction tax structure of any major US market. A $2M Manhattan apartment is taxed by the federal government, by New York State, by New York City, and — if it's a co-op — by the building itself. The buyer owes a flat-rate cliff tax that triggers at $1M. The seller owes a transfer tax to the city and a separate transfer tax to the state, plus an additional supplemental tax above $3M. Capital gains on the eventual sale stack federal and state and city rates. And depending on whether the apartment is a co-op, a condo, a sponsor unit, a 421-a building, or a 485-x building, the answers shift again.
This guide is the reference. It covers every tax and cost a Manhattan buyer or seller actually pays in 2026, with the bracket tables, the cliff dynamics, the fractional assessment pattern that quietly makes prewar co-ops cheaper to own than the listings suggest, and the negotiating windows where the right broker can save you real money.
If you're researching a Manhattan transaction in 2026 — whether you're 18 months out or signing a contract next week — start here.
NYC real estate tax snapshot — Q1 2026
Item | 2026 figure |
Mansion tax — entry threshold | $1,000,000 (flat-rate, applies to entire purchase price) |
Mansion tax — top rate | 3.90% (purchases ≥ $25M) |
Negotiation Dead Zones (mansion tax cliffs) | $1M, $2M, $3M, $5M, $10M, $15M, $20M, $25M |
NYC Real Property Transfer Tax (RPTT) — residential >$500K | 1.425% |
NYS Real Estate Transfer Tax — residential ≤$3M | 0.40% |
NYS Real Estate Transfer Tax — residential >$3M (incl. Additional Base Tax / "Peyser Tax") | 0.65% |
Combined NYC + NYS transfer taxes — typical (≤$3M) | 1.825% |
Combined NYC + NYS transfer taxes — residential >$3M | 2.075% |
Mortgage Recording Tax (MRT) — condos only, buyer pays, loans >$500K | 1.925% |
Title insurance — condos only, buyer pays | ~0.7% (combined owner + lender policies) |
30-year jumbo fixed (May 2026) | 6.125% |
Federal capital gains top rate (long-term) | 20% + 3.8% NIIT = 23.8% |
NYS top capital gains rate | ~10.9% |
NYC top capital gains rate | ~3.876% |
Combined capital gains exposure (high earners) | approaching ~38% before deductions and exclusions |
Primary residence exclusion (Section 121) | $250K (single) / $500K (married) |
Federal SALT deduction cap (2026 tax year, OBBBA) | $40,400 (phase-down begins at ~$500K MAGI) |
Each of these is unpacked in detail below.
What this guide covers
1. Why NYC has the most complex residential tax structure in the country
Most US homeowners pay one property tax to one local jurisdiction and a federal capital gains rate when they sell. That's it.
NYC homeowners pay:
Federal income / capital gains tax
The 3.8% Net Investment Income Tax (NIIT) for high earners
New York State income / capital gains tax
New York City income / capital gains tax (most buyers and sellers are also city residents)
Property tax to NYC, calculated through Class 2 assessment ratios that don't track market value
The mansion tax (buyer-paid, on purchase)
NYC Real Property Transfer Tax (seller-paid, on sale)
NYS Real Estate Transfer Tax + the Additional Base Tax above $3M
Mortgage recording tax (buyer-paid on condos with financing > $500K)
Title insurance (condo buyers only)
Co-op flip tax (paid by buyer or seller depending on building bylaws)
421-a or 485-x phase-out math, if applicable
For a typical $2M Manhattan condo purchase by a financed buyer, the buyer writes about ten separate checks at closing, the seller writes another five, and the federal/state/city governments collect from both sides. None of this is unusual to a Manhattan attorney; all of it is unusual to anyone who has only bought property elsewhere.
The complexity creates four kinds of risk: paying a tax you didn't know about, missing a deduction or exclusion, mistiming a transaction across a cliff, or buying into a building whose tax structure changes in five years. This guide addresses all four.
The thesis of this guide: in Manhattan, every cost the listing leaves out — mansion tax cliffs, MRT on condos, the prewar property tax differential, 421-a phase-outs, the $3M seller cliff — is a cost the right broker is already factoring into your offer or your listing strategy. The guide below is the reference. The savings are in the application.
2. The buyer's full tax stack
Every Manhattan buyer pays some subset of the following at closing or annually:
At closing:
Mansion tax (purchases ≥ $1M only) — 1.00%-3.90% flat-rate on entire purchase price
Mortgage recording tax (condos only, financed only, loans > $500K) — 1.925% of loan amount
Title insurance (condos only, financed) — ~0.5% of purchase price for owner's policy + ~0.2% for lender's policy
NYC + NYS transfer taxes (sponsor units only, where the buyer absorbs by contract) — 1.825% standard
Co-op flip tax (some buildings push to buyer, typical 1-3%)
Lender attorney fees, origination, appraisal — typically 0.75-1.25% of loan
Buyer's attorney fees — $2,500-$5,000
Move-in fees, recording fees, lien searches, UCC filings — ~$1,500-$3,000
Annually:
Property tax — generally 0.75-1.5% of assessed value (which is often a fraction of market — see Section 8)
Common charges (condos) or maintenance (co-ops, which includes the building's share of property tax and underlying mortgage)
On eventual sale:
Capital gains tax — federal, state, city, NIIT (see Section 10)
Transfer taxes (seller side, but factor into your hold-period math)
For the full buyer-side line-by-line, see the Manhattan buyer closing costs deep dive.
3. The seller's full tax stack
The Manhattan seller's side is shorter at closing but heavier on tax exposure:
At closing:
NYC Real Property Transfer Tax — 1.0% (sales ≤ $500K) or 1.425% (sales > $500K)
NYS Real Estate Transfer Tax — 0.4% (sales ≤ $3M) or 0.65% (residential sales > $3M, the Additional Base Tax)
Co-op flip tax (most buildings, paid by seller) — 1-3% of sale price, set by bylaws
Broker commission — typically 5-6% of sale price (seller pays both sides)
Seller's attorney fees — $2,500-$5,000
Mortgage payoff costs (if financed)
Move-out and pickup fees — $500-$1,500
On the gain:
Federal capital gains tax (long-term: 0%, 15%, or 20% depending on income)
3.8% Net Investment Income Tax (NIIT) for higher earners
New York State capital gains (treated as ordinary income, ~6-10.9% depending on bracket)
New York City capital gains (~3.078-3.876%)
Less: $250K (single) / $500K (married) primary residence exclusion if eligible
For the full seller-side breakdown, see the Manhattan seller closing costs deep dive.
The transaction stack: a $2M Manhattan condo, both sides
To make the cost stacking concrete, here's what each side actually pays on a typical $2M Manhattan condo (financed at 80% LTV):
Buyer's stack (what you write checks for, on top of $2M purchase):
Line item | Amount | Running total above price |
Purchase price | $2,000,000 | — |
Mansion tax (1.00% × $2M) | +$20,000 | $20,000 |
Mortgage recording tax (1.925% × $1.6M loan) | +$30,800 | $50,800 |
Title insurance — owner's + lender's policies | +$14,000 | $64,800 |
Loan origination + appraisal | +$13,000 | $77,800 |
Buyer's attorney | +$3,500 | $81,300 |
Lender attorney + recording + lien + escrow + UCC | +$3,000 | $84,300 |
Move-in fees, lien searches | +$1,500 | $85,800 |
Total buyer cash to close | ~$2,485,800 | +$485,800 above price |
(of which $400K is the 20% down payment, ~$85,800 is closing costs) | (~4.3% in transaction costs) |
Seller's stack (what gets deducted from $2M sale price):
Line item | Amount | Running net |
Sale price | $2,000,000 | $2,000,000 |
Broker commission (5.5%) | −$110,000 | $1,890,000 |
NYC RPTT (1.425%) | −$28,500 | $1,861,500 |
NYS Real Estate Transfer Tax (0.4%) | −$8,000 | $1,853,500 |
Seller's attorney | −$3,500 | $1,850,000 |
Misc. (mortgage payoff costs, move-out fees, etc.) | −$2,000 | $1,848,000 |
Seller's net proceeds (before capital gains tax) | ~$1,848,000 | ~92.4% of sale price |
The same $2M transaction generates ~$170K of stacked tax + transaction costs across both sides — most of which are non-negotiable. Every dollar of buyer's mansion tax + transfer taxes goes to NYC and NYS, not to the seller. Every dollar of broker commission is a real third-party cost. Understanding the stack is the prerequisite to negotiating it.
4. The mansion tax — flat-rate cliffs, full bracket table
The mansion tax is the single most misunderstood tax in NYC residential real estate. The biggest mistake buyers and even some brokers make is assuming it's a marginal/progressive tax like federal income tax. It is not. It's a flat-rate cliff tax.
Once a purchase price crosses a threshold, the corresponding rate applies to the entire purchase price — not just the portion above the threshold. This creates sharp cliff effects at each tier boundary that materially distort how Manhattan apartments are priced and negotiated.
Brackets in 2026:
Purchase price | Rate (applied to entire price) |
Under $1M | 0% |
$1M to <$2M | 1.00% |
$2M to <$3M | 1.25% |
$3M to <$5M | 1.50% |
$5M to <$10M | 2.25% |
$10M to <$15M | 3.25% |
$15M to <$20M | 3.50% |
$20M to <$25M | 3.75% |
$25M and up | 3.90% |
Worked examples:
Purchase price | Rate | Mansion tax owed |
$999,000 | 0.00% | $0 |
$1,250,000 | 1.00% | $12,500 |
$1,500,000 | 1.00% | $15,000 |
$1,999,000 | 1.00% | $19,990 |
$2,500,000 | 1.25% | $31,250 |
$2,999,000 | 1.25% | $37,488 |
$3,500,000 | 1.50% | $52,500 |
$4,950,000 | 1.50% | $74,250 |
$5,000,000 | 2.25% | $112,500 |
$7,500,000 | 2.25% | $168,750 |
$10,000,000 | 3.25% | $325,000 |
$15,000,000 | 3.50% | $525,000 |
$20,000,000 | 3.75% | $750,000 |
$25,000,000 | 3.90% | $975,000 |
Cliff dynamics. A buyer at $4,999,999 pays $74,999.99 in mansion tax. A buyer at $5,000,000 pays $112,500 — $37,500 more in tax for $1 more in price. The cliffs at $1M, $5M, $10M, $15M, $20M, and $25M all create similar distortions, with $5M being the most punishing in trophy Manhattan.
The cliff impact at each threshold:
Crossing | Tax just under | Tax at threshold | Cliff cost |
$999,999 → $1,000,000 | $0 | $10,000 | |
$2,999,999 → $3,000,000 | $37,500 | $45,000 | $7,500 |
$4,999,999 → $5,000,000 | $74,999 | $112,500 | $37,500 |
$9,999,999 → $10,000,000 | $324,999 | $325,000 | $1 (smallest cliff) |
$14,999,999 → $15,000,000 | $487,499 | $525,000 | $37,500 |
$19,999,999 → $20,000,000 | $699,999 | $750,000 | $50,000 |
$24,999,999 → $25,000,000 | $937,499 | $975,000 | $37,500 |
This is why Manhattan listings cluster at $999K, $1.99M, $2.99M, $4.95M-$4.99M, $9.95M, $14.95M, and almost never at the round-number thresholds. Sellers price just under a threshold to keep their pool of buyers wider.
2026 Insider Tip: Smart sellers price under the cliff. Smart buyers either offer under the cliff or far enough above that the higher tax is worth it. The "dead zones" are the $20K-$50K bands just above each threshold — $1.00M-$1.05M, $5.00M-$5.05M, $10.00M-$10.05M. Almost no one wants to land there because the buyer is paying a much higher effective tax rate than the property's value justifies.
For the deeper analysis, see the NYC mansion tax bracket guide.
5. NYC + NYS transfer taxes
The transfer tax is paid by the seller in a typical Manhattan resale, and it stacks two layers:
NYC Real Property Transfer Tax (RPTT):
1.0% for residential sales ≤ $500K
1.425%Â for residential sales > $500K
NYS Real Estate Transfer Tax:
0.4% for sales ≤ $3M
0.65%Â for residential sales > $3M (the additional 0.25% is the "Additional Base Tax," added in the 2019 NY State budget)
Combined transfer taxes:
Sales > $500K and ≤ $3M residential: 1.825%
Sales > $3M residential: 2.075%
On a $2M Manhattan resale:Â the seller writes a check for ~$36,500 in transfer taxes ($28,500 NYC + $8,000 NYS). On a $5M Manhattan resale:Â ~$103,750 ($71,250 NYC + $32,500 NYS). On a $10M Manhattan resale:Â ~$207,500.
Resale vs. sponsor convention. In a typical Manhattan resale (an apartment sold by an individual owner), the seller pays the transfer taxes. In a sponsor sale (new development, sold by the original developer), the offering plan typically requires the buyer to pay these — adding 1.825% (or 2.075%) on top of standard buyer closing costs before mansion tax even enters the picture. This is the single largest hidden cost in new-development purchases, and it's routinely buried in the offering plan rather than disclosed upfront.
2026 Insider Tip: On any new-development condo, the FIRST page of the offering plan to read is the buyer's closing-cost summary. If you see "buyer pays NYC + NYS transfer taxes" — that's an extra ~$36,500 on a $2M purchase. Some sponsors will negotiate this concession on units that have been sitting; almost none will offer it on Day 1 of an offering.
6. Mortgage recording tax (condos only)
The Mortgage Recording Tax (MRT) is one of the most punishing taxes in the NYC system, and it only applies to condos.
Mechanics:
Levied on the loan amount, not the purchase price
1.8% on loans up to $500K, 1.925%Â on loans above $500K
Paid by the buyer at closing
On a $2M condo with 80% LTV ($1.6M loan): 1.925% × $1.6M = $30,800 On a $5M condo with 70% LTV ($3.5M loan): 1.925% × $3.5M = $67,375
Co-ops are exempt. Because in a co-op you're buying shares of a corporation, not real estate, there's no real estate mortgage to record — and so no MRT. This is one of the largest single drivers of co-op vs. condo cost differences and a key reason co-ops trade at lower prices per square foot.
2026 Insider Tip: A buyer choosing between a $1.8M co-op and a $1.8M condo with 80% financing pays roughly $27,720 more at closing on the condo just from MRT. Over a 5-7 year hold, that's a real number — and it's one reason buyers who are price-sensitive should weigh co-ops more seriously than they often do.
For the full co-op vs. condo comparison, see the co-op vs. condo Manhattan guide.
7. Title insurance (condos only)
Condo buyers also pay title insurance, which co-ops are exempt from for the same reason — there's no real estate title to insure in a co-op.
Two policies typically purchased:
Owner's title insurance (~0.5% of purchase price, optional but standard) — protects the buyer from prior-owner claims
Lender's title insurance (~0.2% of purchase price, required by lender) — protects the lender's interest
On a $2M condo:Â typically $10,000-$14,000 in combined title insurance.
This is a one-time cost at closing, not annual.
8. Property tax — the prewar fractional assessment pattern
NYC property tax is a creature unto itself. Most owners assume it tracks market value. It doesn't.
The Class 2 system. Most apartment buildings (4+ units) fall under Tax Class 2. Class 2 assessment ratios are statutorily capped — the assessed value can grow by no more than 6% per year and 20% over five years, regardless of how much the underlying property has actually appreciated. Combined with the underlying assessment-to-market ratio (which is often well below 100%), this means many established buildings — especially prewar co-ops on the Upper East and Upper West Sides — are taxed on a small fraction of their actual market value.
The prewar fractional assessment pattern. A typical 1925 Upper West Side prewar co-op selling for $2M today might carry an effective property tax bill of $8,000-$15,000 per year. A new-construction $2M condo across the street, taxed at closer-to-market assessment, might carry $20,000-$35,000 per year — sometimes more after a 421-a abatement phases out.
This is one of the most-missed Manhattan-specific cost differentials. A buyer comparing a $2M prewar co-op to a $2M new condo on a maintenance/common-charge basis is missing that the underlying property tax differential alone can be $1,000-$2,000 per month.
Class differences:
Class 1: 1-3 family homes, the lowest tax rate (~0.62% of assessed value, 2026), but with an even smaller assessment ratio
Class 2: 4+ unit residential (the bulk of Manhattan apartments), ~12.5% nominal rate but applied to a fraction of market value
Class 4: commercial property, highest effective rate
2026 Insider Tip:Â When evaluating two similarly-priced apartments, request the actual current property tax bill from the building or managing agent. Don't rely on listing data or rough estimates. The $1,000-$2,000/month delta between a fractionally-assessed prewar co-op and a market-assessed new condo is a real number, and over a 10-year hold it can outweigh almost every other variable in the buy decision.
For deeper analysis of how building-level financials surface these costs, see how to read a Manhattan co-op's financials before you buy.
9. 421-a, 485-x, and tax abatement phase-outs
The NYC tax abatement landscape changed significantly in 2022 and again in 2024. There are now three concurrent programs Manhattan buyers and owners need to understand.
421-a (legacy). The original 421-a abatement program, which expired in 2022 for new construction. Buildings that received 421-a designation before expiration retain their abatement structure — typically 10, 15, 20, or 25 years of phase-up. A typical 25-year 421-a apartment paid almost nothing in property tax in the early years and gradually phases up to full market rate. The phase-up is steepest in years 11-15 — the "year-12 cliff" that buyers routinely underestimate.
485-x (current). Enacted in 2024 to replace 421-a, with stricter affordability requirements and longer construction window. New buildings completed in 2025 and 2026 are increasingly under the 485-x regime. Different schedule, different affordability commitments, and the buyer-side implications are still being interpreted in practice.
J-51. A separate abatement covering renovation/rehabilitation of existing buildings (rather than new construction). Less common in Manhattan than 421-a but still in effect for some prewar buildings that did major rehabilitation projects.
The year-12 cliff. A typical 421-a apartment showing $500/month in property tax today and a $4,000/month property tax in year 11 is not the same financial product. Buyers who don't model the phase-out get squeezed.
2026 Insider Tip:Â When you buy a 421-a or 485-x condo, ask for the year-by-year tax projection through full phase-out. The sponsor or building must provide this. Calculate your year-12 all-in monthly cost. If that number exceeds your safe affordability today, you're buying a future problem in year 11.
For the full breakdown, see the 421-a tax abatement guide.
10. Capital gains on sale — federal, state, city, NIIT
Selling a Manhattan apartment for a profit triggers four separate capital gains layers:
1. Federal long-term capital gains tax. 0% / 15% / 20% based on income brackets. Most Manhattan sellers in the $1M+ range hit the 20% rate.
2. Net Investment Income Tax (NIIT). An additional 3.8% federal tax on investment income (including capital gains) for high earners — single filers above $200K MAGI, married above $250K. Most Manhattan sellers hit this.
3. New York State income tax on the gain. Treated as ordinary income, so subject to the standard NY State brackets — currently topping out around 10.9% for high-income filers.
4. New York City income tax on the gain. Also ordinary income, with city brackets topping out around 3.876%.
Combined exposure. High-income NYC sellers can face combined effective capital gains exposure approaching ~38% before deductions, exclusions, basis adjustments, and planning strategies. (The exact rate depends on filer status, income level, deductions, and state/city residency — these are directional figures.)
The primary residence exclusion (Section 121). If you owned and used the apartment as your primary residence for at least 2 of the last 5 years before sale, you can exclude:
$250,000 of gain (single filer)
$500,000 of gain (married filing jointly)
This is one of the biggest tax breaks available to Manhattan sellers, and one of the most commonly missed:
Pied-Ã -terre owners don't qualify
Buyers who bought < 2 years ago and are flipping don't qualify
Owners who lived elsewhere for the last 3 years before selling don't qualify
Basis adjustments. Your taxable gain is sale price minus adjusted basis, not minus original purchase price. Basis is increased by capital improvements (renovations, kitchen/bath gut jobs, HVAC, structural work). Keep receipts. A $200K renovation properly documented reduces your gain by $200K — saving 30-38% of that amount in combined tax.
2026 Insider Tip: The single most-missed tax planning move in Manhattan sales is failing to track and document capital improvements. Every gut renovation, every new kitchen, every floor refinish increases your basis. The seller who walks into closing with a clean spreadsheet of capitalized improvements over the years saves real money. The seller who shrugs and uses original purchase price as basis overpays — sometimes by tens of thousands.
For the full tax implications breakdown, see tax implications of selling a Manhattan apartment.
11. The $3M seller cliff — Additional Base Tax
The single biggest residential transfer tax cliff on the seller side is at $3M, driven by the NYS Additional Base Tax — informally known in the NYC real estate industry as the "Peyser Tax" after the legislator who championed it.
Below $3M residential:Â combined NYC + NYS transfer taxes = 1.825% (NYC 1.425% + NYS 0.4%). Above $3M residential:Â combined = 2.075%Â (NYC 1.425% + NYS 0.65%, the latter including the 0.25% NYS Additional Base Tax / Peyser Tax added in the 2019 budget).
On a $3,000,000 sale: ~$54,750 in combined transfer taxes. On a $3,000,001 sale: ~$62,250 — $7,500 more in tax for $1 more in price.
Negotiating implications. Sellers listing in the $2.85M-$3.05M range face the same pressure as buyers in the mansion tax dead zones. A seller listing at $2,995,000 captures meaningfully better net proceeds than the same seller listing at $3,005,000 — even at identical buyer demand. In tight markets, buyers can sometimes negotiate the seller absorbing the additional 0.25% on a $3M+ sale as a price concession.
2026 Insider Tip: If you're selling and your apartment is comp-supported in the $2.85M-$3.10M range, list at $2,995,000 first. The cliff effect on the seller side mirrors the mansion tax cliff on the buyer side — and you can always negotiate up. A dual-cliff at $3M (Additional Base Tax for the seller AND a mansion-tax bracket-edge for the buyer) creates the biggest negotiating distortion in mid-market Manhattan.
12. Co-op vs. condo tax differences
The tax differences between co-ops and condos drive much of why co-ops trade at lower per-square-foot prices than equivalent condos.
Tax / cost | Co-op | Condo |
Mortgage recording tax (MRT) | None (no real-estate mortgage) | 1.925% on loans > $500K |
Title insurance | None | ~0.5-0.7% of purchase |
Property tax | Paid through monthly maintenance (usually fractionally assessed) | Direct billing (often closer to market assessment) |
Mansion tax | Same as condo | Same as co-op |
Transfer tax (seller-paid) | Same | Same |
Flip tax | Common, 1-3% (set by bylaws, varies who pays) | Rare in condos |
Capital gains | Same | Same |
On a $2M financed purchase, the co-op buyer saves roughly $30K-$45K in closing costs vs. the condo buyer — almost entirely from MRT and title insurance. Plus typically 30-50% lower per-square-foot pricing on the underlying property. Plus often dramatically lower effective property tax via the prewar assessment pattern.
The co-op pays for these advantages with: board approval risk, more restrictive sublet rules, and lower flexibility for resale or alternative use.
For the buying-side decision framework, see co-op vs. condo in Manhattan: which should you buy?. For sellers weighing how the asset class affects their pricing strategy and timeline, see selling a co-op vs. selling a condo in Manhattan.
13. Foreign buyer and foreign seller tax issues
Foreign nationals face additional tax friction at both ends of a Manhattan transaction.
At purchase:
Most Manhattan co-ops will not approve a non-US-resident buyer. Practical inventory is limited to condos.
Higher down payment requirements (typically 30-50% from foreign buyers, sometimes higher).
Additional documentation requirements (apostilled foreign tax returns, foreign-bank source-of-funds verification, etc.).
During ownership:
Non-resident aliens are generally subject to US federal withholding on rental income at a flat statutory rate, unless an election under Section 871(d) is made to treat the rental income as effectively connected with a US trade or business (which generally allows expense deductions). Specific tax outcomes depend on residency status, treaty position, and election timing.
Estate tax exposure: non-resident aliens face a substantially lower US estate tax exemption than US residents — historically a small fixed dollar amount versus the multi-million-dollar US-resident exemption. Many foreign buyers structure ownership through entities (LLCs, trusts, foreign corporations, or layered vehicles) specifically to manage this exposure. The right structure depends heavily on home-country tax treatment and is best designed with a cross-border tax attorney before purchase, not after.
At sale (FIRPTA): the Foreign Investment in Real Property Tax Act requires the buyer of a foreign-person seller to withhold up to 15% of the sale price for the IRS at closing. The seller can later claim a refund if their actual tax liability is lower, but the cash flow impact is significant. FIRPTA is technically a buyer-side burden but it affects deal economics on the eventual sale.
Pied-à -terre tax (proposed). Originally proposed in 2018-19 and revived in 2025-26 as part of the Mamdani agenda, the pied-à -terre tax would impose an annual surcharge on non-primary-residence apartments above a high-end threshold (typically proposed at $5M+). As of May 2026, no surcharge has been enacted, but the proposal is under serious discussion. Buyers signing on a $5M+ pied-à -terre in 2026 should model a potential 0.5%-4% annual surcharge into a 5-10 year hold.
For the full foreign buyer's playbook, see the Manhattan foreign buyer's guide. For the policy debate, see the pied-Ã -terre tax debate.
14. SALT cap and the federal landscape
The State and Local Tax (SALT) deduction cap is one of the most consequential federal tax variables for NYC homeowners — and as of May 2026, it looks materially different than it did just one tax year ago.
The 2026 reality. The original $10,000 SALT cap, set by the 2017 Tax Cuts and Jobs Act, was scheduled to sunset on December 31, 2025. Before it could lapse, the One Big Beautiful Bill Act (OBBBA), signed in July 2025, raised the cap to $40,000 for the 2025 tax year, with a 1% annual escalation. The 2026 SALT cap is $40,400.
The phase-down for high earners. The expanded cap is not unlimited at the top end:
Phase-down begins at modified adjusted gross income (MAGI) of ~$500,500Â (2026)
The deduction is reduced by 30 cents per dollar of MAGI above the threshold
The deduction never falls below $10,000Â (the original TCJA floor)
High-earning Manhattan filers (MAGI >$600K) are still effectively capped near the original $10K floor
Sunset clause. The expanded $40,000 cap is scheduled to revert to $10,000 in 2030 unless Congress acts again.
What SALT covers: state income tax + local income tax + property tax. For a Manhattan owner paying $30K in NYS+NYC income taxes plus $15K in property tax, the OBBBA expansion meaningfully increased the federal deduction available — though only for filers below the phase-down threshold.
Practical implication for NYC owners:
Middle-income filers ($200K-$500K MAGI) saw real federal tax savings under OBBBA — for a typical $300K MAGI Manhattan owner with $35K in combined SALT, the deduction roughly tripled vs. the pre-OBBBA $10K cap.
High-income filers ($600K+ MAGI) saw little change — still effectively capped at $10K.
The federal mortgage interest deduction (separate from SALT) is unaffected.
Why this matters for transaction decisions:Â rent-vs-buy math, after-tax carry costs, and the tax-shield value of mortgage interest all depend on whether a buyer falls above or below the OBBBA phase-down threshold. The same $2M apartment generates meaningfully different after-tax economics for a buyer at $400K income vs. a buyer at $700K income.
For the full rent-vs-buy framework — including how OBBBA shifts the breakeven hold period — see should I rent or buy in Manhattan?. For income thresholds at every Manhattan price band, see how much income do you need to buy in Manhattan?.
15. Common questions
How is mansion tax calculated in NYC? NYC mansion tax is a flat-rate cliff tax starting at 1.00% for purchases of $1M or more. Unlike federal income tax, the rate applies to the entire purchase price, not just the portion above the threshold. On a $1.5M purchase: 1.00% × $1.5M = $15,000. On a $3M purchase: 1.50% × $3M = $45,000. On a $5M purchase: 2.25% × $5M = $112,500. Cliff effects exist at $1M, $2M, $3M, $5M, $10M, $15M, $20M, and $25M.
Who pays the mansion tax — buyer or seller? The buyer pays the NYC mansion tax at closing. It applies to all residential purchases of $1M and above and is filed via the TP-584 form alongside the deed (condos) or stock-and-lease assignment (co-ops).
At what price does mansion tax start in NYC? The NYC mansion tax starts at exactly $1,000,000. A purchase of $999,999 owes zero mansion tax. A purchase of $1,000,000 owes 1.00% of the full $1M = $10,000. That $1 difference triggers $10,000 of additional tax — the steepest cliff effect in the entire mansion tax structure.
Who pays NYC transfer tax? The seller pays combined NYC + NYS transfer taxes in a typical Manhattan resale — 1.825% below $3M and 2.075% above $3M. The 0.25% addition above $3M is the NYS Additional Base Tax (also known as the "Peyser Tax"). In sponsor (new-development) sales, the offering plan typically requires the buyer to absorb these.
How much is mortgage recording tax in NYC? The NYC + NYS Mortgage Recording Tax is 1.925% of the loan amount for loans above $500K, paid by the buyer at closing. Co-ops are exempt because no real-estate mortgage is recorded — you're buying shares of a corporation, not real property. This is one of the largest single drivers of the co-op vs. condo cost differential.
How much are NYC closing costs for a buyer? Manhattan buyer closing costs typically run 2-4% for co-ops and 3-5% for condos, plus the mansion tax (1.00%-3.90%) for purchases of $1M and above. The condo premium comes from title insurance (~0.7% of purchase) and the mortgage recording tax (1.925% of the loan).
How much are closing costs for a NYC seller? Manhattan sellers pay roughly 7-10% of sale price in total closing costs. Broker commission (5-6%) is the largest component, followed by combined NYC + NYS transfer taxes (1.825% below $3M, 2.075% above), attorney fees, and (in co-ops) the flip tax (1-3% of sale price).
What is the 421-a tax abatement? 421-a is a legacy NYC property tax abatement program for new residential construction that expired for new applications in 2022. Buildings designated under 421-a before expiration retain abatement structures that reduce property tax for 10, 15, 20, or 25 years before phasing out to full market-rate. It was replaced by the 485-x program in 2024.
What is 485-x? 485-x — formally the "Affordable Neighborhoods for New Yorkers Tax Incentive" (ANNY) — is the successor to 421-a, enacted in April 2024. It provides property tax exemptions for new residential construction that includes affordable housing or rent-stabilized units, with stricter affordability requirements and longer construction windows than 421-a. Buildings completed in late 2025 and 2026 are increasingly under the 485-x regime.
Do NYC homeowners pay capital gains when they sell? Yes — NYC sellers face combined federal + NYS + NYC + NIIT capital gains exposure approaching ~38% for high earners. The taxable gain is sale price minus adjusted basis (which includes capital improvements). The Section 121 primary residence exclusion ($250K single / $500K married) reduces the taxable gain for owners who used the apartment as their primary residence for 2 of the last 5 years.
What is NIIT? The Net Investment Income Tax (NIIT) is a 3.8% federal tax on investment income — including real estate capital gains — for higher-income filers (single MAGI >$200K, married MAGI >$250K). Most Manhattan sellers hit this threshold.
What is the $3M seller cliff? The NYS Additional Base Tax (also called the "Peyser Tax") is a 0.25% surcharge on residential sales above $3M, raising combined NYC + NYS transfer taxes from 1.825% to 2.075%. A $1 increase in price above $3M can cost the seller ~$7,500 more in tax. Sellers in the $2.85M-$3.05M range often list just below $3M to avoid the cliff.
Is there a pied-à -terre tax in NYC? As of May 2026, no pied-à -terre tax has been enacted in New York City. The proposal — originally raised in 2018-19 and revived in 2025-26 as part of the Mamdani affordability agenda — would impose an annual surcharge on non-primary-residence apartments above a threshold (typically proposed at $5M+).
Why are prewar co-op property taxes so much lower than new condo property taxes? NYC's Class 2 assessment system caps annual assessment growth at 6% per year and 20% over 5 years, regardless of market appreciation. Prewar buildings owned and assessed for decades are typically taxed on a fraction of their true market value, while new construction is assessed closer to market — sometimes 2-4x higher property tax bills on equivalent-value apartments.
Does the SALT cap affect NYC homeowners? The 2026 SALT cap is $40,400 under the One Big Beautiful Bill Act (OBBBA), with a phase-down beginning at ~$500K MAGI. OBBBA raised the cap from the original $10,000 TCJA limit, providing meaningful federal tax relief for middle-income NYC owners. High-earning Manhattan filers (MAGI >$600K) remain effectively capped near $10K. The expanded cap is scheduled to revert to $10K in 2030.
How does the buyer's mortgage recording tax compare to the seller's transfer tax? On a $2M condo with 80% LTV financing, the buyer pays ~$30,800 in MRT and the seller pays ~$36,500 in combined transfer taxes. Both are real costs that compress the round-trip economics of Manhattan condo ownership.
Do I owe FIRPTA withholding when I buy a Manhattan apartment from a foreign seller? Yes — FIRPTA requires the buyer of property from a foreign-person seller to withhold up to 15% of the sale price for the IRS at closing. The seller can later claim a refund of any over-withholding, but the cash flow obligation lands on the buyer to enforce at the closing table.
Can co-op flip taxes be negotiated? The flip tax rate itself is fixed by the building's bylaws and cannot be negotiated. Who pays it (buyer vs. seller) is sometimes set by bylaws and sometimes negotiable between the parties, depending on the building.
16. What to do next
In Manhattan, taxes and transaction costs are not side notes to the deal — they are part of the deal itself. The price agreed in a contract is rarely the price either side actually pays or actually nets. Buyers who understand the stack offer better; sellers who understand it list smarter; both end up with cleaner closings and fewer surprises.
If you're researching a Manhattan transaction in 2026:
Run the actual numbers. Generic estimates and ranges only go so far. Plug your specific price point into the Buyer Closing Cost Calculator or the Seller Closing Cost Calculator for your actual line-by-line.
Read the pillar guide for your situation. This guide is the tax and cost reference. The full transaction playbook — pricing, prep, timeline, broker selection, board approval, negotiation — lives in the Manhattan Apartment Buying Guide or the Manhattan Apartment Selling Guide.
Have a conversation. Tax structure shapes every Manhattan transaction at every price point. The right broker — working alongside the right attorney and the right CPA — saves real money at every stage of the deal.
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Corey Cohen · Principal, The Roebling Team at Compass · c.cohen@compass.com · 646-939-7375
This guide is editorial and does not constitute legal, tax, or financial advice. Tax rates, brackets, and rules change. Figures cited are approximate and reflect 2026 statutory and market conditions; individual situations vary materially based on filing status, residency, entity structure, building specifics, and contract negotiation. Consult a qualified attorney and CPA for advice on your specific situation. The Roebling Team at Compass is a licensed New York real estate brokerage. © 2026.