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New York plans tax on homes over $1 million purchased with cash

New York lawmakers are planning a new tax on New York City homes purchased in cash for at least $1 million, according to people familiar with the state budget negotiations.

(Bloomberg) -- New York lawmakers are planning a new tax on New York City homes purchased in cash for at least $1 million, according to people familiar with the state budget negotiations.

The lawmakers are also considering expanding the tax to all-cash purchases over $1 million in New York, including those in the suburbs and upstate, people familiar with the matter said.

The New York City levy alone is expected to raise $160 million to help fill the city’s budget hole, said one of the people who asked not to be identified when discussing private deliberations. The proposed tax would be levied at 1% of the purchase price and would be paid by the buyer, according to the people.

A spokesperson for Governor Kathy Hochul said she “announced a general agreement with the State Legislature on many of the major elements of the FY 2027 Budget. The final budget bills will provide additional details.”

A spokesperson for Mayor Zohran Mamdani said he supports the new tax, and proposed it as one of several possible options for new ways to raise revenue.

All-cash transactions have risen in New York as high mortgage costs have deterred financing. They are also an attractive option for sellers in New York City’s ultra-competitive real estate market — it’s faster than dealing with the occasionally lengthy mortgage approval process, and less likely to fall through.

Such purchases made up more than 60% of the nearly 18,000 transactions in New York City in the first six months of 2025, according to data compiled by the nonprofit Center for New York City Neighborhoods. The report found that in Manhattan, nine out of 10 purchases over $3 million were done in all-cash transactions between January and June of 2025.

“I would imagine the mortgage workarounds for this new tax will soar and render the tax collections nominal,” said Jonathan Miller, the director of markets for StreetMatrix, a real estate analytics platform. He estimates that 75% of home transactions over $1 million are bought with cash. In Manhattan, last year’s cash purchases above that price totaled $17.4 billion.

“I continue to be amazed at how little these proposals anticipate the change in human behavior to avoid a new tax,” Miller said.

Budget Issues

New York Assembly Speaker Carl Heastie said the tax would be included in the final budget as “part of the plan to help close the city’s deficit.” State Senator James Skoufis, who sits on the chamber’s finance committee, also said in an interview the new levy was discussed.

Mamdani unveiled his $124.7 billion budget plan for the fiscal year that starts on July 1 that includes more assistance from Albany. Hochul said the state will send $4 billion in new aid to the city to help close the budget hole.

Mamdani is counting on funds from a proposed tax on second homes worth more than $5 million that state and city lawmakers are still figuring out how to implement.

Hochul has told lawmakers that for the next two years, co-ops and condos will be assessed on their ‘market value,’ a figure determined by the Department of Finance that can vary substantially from a property’s sale price.

Under the short-term plan, homes with an assessed market value of $1 million to $3 million will pay a 4% tax; properties between $3 million and $5 million will pay 5.25%; while those at $5 million and above would pay a 6.5% surcharge.

The governor’s office estimates that $1 million of market value is equivalent to $5 million in sales price. The New York Times first reported the details.

“New Yorkers are already the most heavily taxed residents in the country, and the city’s budget issues will not be solved by more taxes,” said James Whelan, president of the Real Estate Board of New York. He said that the new proposal would further burden home buyers and sellers in the city and threaten existing revenue.

--With assistance from Paulina Cachero.

(Updates with comment from real estate expert in eighth paragraph.)