The real estate community in New York is speaking out against what is being called the "pied-a-terre tax."
With the April deadline approaching for budget approval in Albany, the idea of imposing a long-discussed tax on owners of second homes in New York City that are worth more than $5 million is gaining interest. That's got the real estate industry mad, and an independent financial watchdog commission says real property tax reform would be preferred.
The idea of a tax on high-priced second homes began to gain momentum when one of the world's richest men bought a second home near Central Park for $238 million earlier this year. The property taxes on that home are about $516,000 a year -- a steep price for sure. However, when you consider that tax represents a rate of less than one-fourth of 1 percent of the property's purchase price, it doesn't sound that much.
"If they have money to buy a $5 million apartment, which is not their prime residence, and it's their little Manhattan getaway, they can afford the tax," Gov. Andrew Cuomo said in a recent interview. The estimated $650 million that would be generated annually by the tax could be used for critical subway fixes, he argues.
The Wall Street Journal noted in a recent article that the tax would apply to any property purchased through a limited liability corporation or a corporation. This means it also could apply to well-heeled buyers of primary homes. The biggest underlying fear is that people will stop buying homes in New York City.
Fortunately, any change in this particular section of the tax code likely would affect only the "1 percent," as the most moneyed group is known. However, every property owner should keep their ears open for talk of changes in tax law, as should anyone considering buying any property in New York City or anywhere in the state. Before purchasing a residential property, chat with your real estate agent as well as others, such as a financial adviser and a real estate attorney, into the loop.