What It Is, Who Pays It, How to Avoid It

Several states and cities impose a mansion tax, each with different thresholds and rates. The following locations have some of the most notable mansion tax policies:

New York has one of the most well-known mansion tax structures. The state imposes a 1% tax on residential properties sold for over $1 million, with progressively higher rates for more expensive homes.

• 1% tax for properties between $1 million and $2 million.

• 1.25% tax for properties between $2 million and $3 million.

• 1.5% tax for properties between $3 million and $5 million.

• Rates increase up to 3.9% for properties exceeding $25 million.

The tax applies statewide, but it has the greatest impact in New York City, where real estate prices frequently surpass $1 million.

Certain cities in California, including Los Angeles and San Francisco, have mansion tax policies that impose additional transfer taxes on high-value properties. In Los Angeles, the ULA Transfer Tax, passed in 2022, applies as follows:

This tax is designed to fund affordable housing programs and has significantly increased closing costs for high-end real estate transactions.

New Jersey applies a mansion tax to properties sold for more than $1 million, charging a flat rate of 1% on the total sale price. Unlike New York’s tiered system, New Jersey’s mansion tax remains at 1% regardless of how much the sale price exceeds the threshold.

Connecticut has a real estate conveyance tax that functions similarly to a mansion tax, with higher rates for more expensive homes:

• 0.75% tax for properties under $800,000.

• 1.25% tax for properties between $800,000 and $2.5 million

• 2.25% tax for properties over $2.5 million.

• Properties exceeding $4 million are subject to an additional tax.

The mansion tax is an additional cost buyers must consider when purchasing high-value real estate. This tax is meant to generate revenue for housing affordability programs through targeting “luxury” properties, but rising property prices in major cities can trigger it for buyers of modest homes as well. The buyer is typically responsible for paying the mansion tax, although some sellers may negotiate to cover or share the cost. Real estate advisors can provide additional insights into these types of transactions, too.

• A financial advisor can help optimize your financial plan to reduce your tax liability. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• If you want to know how much your next tax refund or balance could be, SmartAsset’s tax return calculator can help you get an estimate.

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