Eyeing a home in Rye or Rye Brook around the $1 million mark? Many buyers are surprised by one line on the closing statement that can change the cash you need to bring: New York State’s “mansion tax.” If you understand when it applies, how it is calculated, and how it fits into Westchester closing costs, you can plan with confidence. In this guide, you’ll learn the basics, see real dollar examples, and get a simple checklist to keep your budget on track. Let’s dive in.
What the NYS mansion tax is
The New York State mansion tax is a state surcharge on the sale of residential property when the purchase price is $1,000,000 or more. It is a transfer tax collected at closing, not an ongoing property tax. In typical practice, buyers pay this tax at closing and it appears as a separate line item in your closing documents.
It applies to residential purchases that meet the price threshold, including single-family homes, condos, and co-ops. The tax is triggered by the contract purchase price reported on transfer documents. It is not based on assessed value or your mortgage amount.
How the tax is calculated
The calculation is simple: mansion tax = purchase price × applicable rate. For most Westchester buyers, this is computed on the full contract price and shown to the cent on your closing statement.
Here are straightforward examples to show the impact on cash to close:
- $950,000 purchase price → no mansion tax.
- $1,000,000 purchase price → $10,000 mansion tax.
- $1,250,000 purchase price → $12,500 mansion tax.
- $2,000,000 purchase price → $20,000 mansion tax.
- $3,500,000 purchase price → $35,000 mansion tax.
Buyers usually pay this tax in cash at closing unless a lender specifically allows certain costs to be financed. Policies vary by lender and loan program, so confirm early. The tax is due even if you buy with all cash.
The $1M “cliff” effect
Small changes above $1,000,000 can create a noticeable jump in required cash. For example, raising an offer from $995,000 to $1,005,000 adds about $10,050 in tax on top of the higher price. If you are near the threshold, model a few price scenarios before you finalize your offer.
When Rye and Sound Shore buyers cross $1M
Rye, Rye Brook, and the broader Sound Shore include a wide range of homes. You will see smaller condos and older single-family homes under $1 million and many renovated, larger, or near-water properties above $1 million.
- Under about $950,000: Many buyers avoid the mansion tax in this band. Inventory often includes smaller or older homes and many condos.
- $950,000 to $1.1 million: This is where offers frequently tip into the tax. Even a modest move above $1 million adds roughly 1 percent to your closing costs.
- $1.1 million to $2 million: Common for renovated homes, larger lots, and homes closer to the water. Plan to include the mansion tax in your cash estimates.
- $2 million and up: Move-up and second-home purchases often land here. The mansion tax becomes a larger dollar figure, so build it into your negotiation and cash planning.
In practice, many properties in the Village of Rye price above $1 million, and Rye Brook’s mix of newer construction and larger single-family homes often crosses the threshold as well.
Other closing costs to factor in
The mansion tax is one part of your total closing costs. Talk with your lender and closing attorney about the full picture in Westchester:
- Mortgage recording tax and recording fees: If you use a mortgage, Westchester County’s mortgage recording tax and related recording fees will apply. Rates and calculations differ from New York City.
- Transfer and recording documentation: Your closing team will prepare and file the required state transfer forms and collect the mansion tax.
- Ongoing property taxes: Westchester property taxes are a separate, ongoing cost. Review annual taxes carefully as you set your budget.
- Negotiation and credits: The mansion tax is typically paid by the buyer, but other costs can be negotiated. Your contract should clearly reflect any credits or allocations agreed to by the parties.
Smart planning checklist
Use this quick list if you are shopping near $1 million:
- Confirm the exact contract price and whether it hits or exceeds $1,000,000.
- Ask your lender if the mansion tax must be paid in cash at closing or if any costs can be financed under your loan program.
- Request a full estimate of closing costs from your attorney or title company, including the mansion tax, mortgage recording tax, title insurance, and standard fees.
- Discuss negotiation options with your agent, such as seller credits. Confirm legality and tax reporting rules with your attorney before you pursue any price-structuring ideas.
- For scenario planning, gather your price, down payment, estimated mortgage, and target closing date. Ask your lender or attorney to model your cash to close with the mansion tax included.
This guide is for general information. The mansion tax and closing costs can materially affect your cash to close. Ask your lender and closing attorney to run the numbers for your exact purchase.
Two quick scenarios
Scenario 1: Offer just above $1M
You find a Rye Brook home listed at $999,000. You consider offering $1,010,000 to win. That change not only increases your price by $11,000 but also adds about $10,100 in mansion tax. If your cash is tight, you might look at a credit from the seller, or decide whether the extra cost still fits your plan.
Scenario 2: Move-up buyer at $1.8M
You are upgrading to a larger Rye home at $1,800,000. The mansion tax adds about $18,000 to your cash at closing. If your lender does not allow financing of closing costs, you need to prepare for that full amount in cash, separate from the down payment and reserves.
How Totally Westchester helps
You do not have to figure this out alone. Our team brings a practical, step-by-step approach so you can move forward with clarity:
- Clear scenario planning near the $1 million threshold.
- Coordination with your lender, attorney, and title company so estimates are accurate and on time.
- Offer strategies that acknowledge cash-to-close impacts, with an eye on credits and clean reporting.
- Local guidance across Sound Shore and Westchester so you understand trade-offs by neighborhood and price band.
Ready to shop with confidence and a complete budget plan? Start the conversation with Totally Westchester.
FAQs
What is the New York State mansion tax for Rye-area buyers?
- It is a state surcharge on residential purchases at $1,000,000 or more, typically paid by the buyer at closing and calculated as a percentage of the full contract price.
Does the mansion tax apply to co-ops and condos in Westchester?
- Yes. If the contract price meets or exceeds $1,000,000, the tax can apply to co-ops, condos, and single-family homes. Reporting forms can differ by property type.
Can I avoid the mansion tax by changing my financing or splitting contracts?
- No. The tax is based on the reported purchase price. Attempts to hide or split the price risk legal and tax penalties. Always follow your attorney’s guidance.
Who usually pays the mansion tax in Westchester closings?
- The buyer typically pays it at closing. Parties can negotiate other closing costs or credits, but the mansion tax obligation must be clearly reflected in the contract and closing documents.
Will my lender allow me to finance the mansion tax in Rye or Rye Brook?
- It depends on the lender and loan program. Some allow certain closing costs to be financed while others require full payment in cash at closing. Confirm early with your lender.