Every week Mansion Global poses a tax question to real estate tax attorneys. Here’s this week’s question.
Q. I own two unrelated entities in a New York cooperative. The first unit is my main official residence. The second unit serves as extra living space for me and my family, including my mother, when she is in town. Would this second unit possibly succumb to the proposed pied?at the-terre tax discussed in Albany?
A. New York State legislation considered an additional tax on second homes earlier this year, but it was not part of the 2022 budget released earlier this month. So you’re off the hook for at least another year.
The so-called pied-à-terre tax would have meant a surcharge for non-primary residences in cities with more than 1 million inhabitants.
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If it had passed, it would have applied for more than $ 5 million worth of single-, double-, and three-family homes that were not, by law, the owner’s primary residence. The tax of between 0.5% and 4% would have been levied on the market value above $ 5 million.
Condos or cooperatives with an estimated value of $ 300,000 or more would have been taxed at a rate between 10% and 13.5% on the estimated value above $ 300,000. No tax would be levied on anything less than $ 300,000.
However, according to Peter Zinkovetsky, an attorney with the New York-based law firm Zinkovetsky, houses occupied or rented full-time by a child or parent of the owner would have been exempt. As long as the unit is occupied for more than six months, it is not subject to tax.
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The idea was first proposed in 2014 by Senator Brad Hoylman, a Democrat. Versions of the pied-a-terre tax were introduced in five legislative terms and reintroduced for fiscal 2022 to fill the budget gap created by the 2020 shutdown of Covid-19.
The New York City Independent Budget Office estimated that the proposal to tax luxury second and third homes would raise at least $ 232 million annually, according to Hoylman’s office.
Governor Andrew Cuomo was never a supporter of the proposal, saying it would discourage wealthy buyers from investing in New York. However, it was removed from draft budgets after the state received more federal funding.
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