New Yorkers who own real estate – even a single townhouse – could be heading into the abyss.
I’m talking about inheritance taxes.
If a New Yorker with a net worth of up to $7,717,500 dies in 2026, the first $7.35 million will be not taxed by the state. But if an estate is worth more than 5 percent above that exclusion threshold, the entire estate is taxed.
Tax professionals call that a cliff.
New York’s estate tax rate starts at 3.06 percent and rises rapidly, reaching 16 percent for estates worth more than $17.25 million. People worth that much have probably done, or at least thought about, estate planning.
It’s New Yorkers who don’t consider themselves rich, but have owned a house and a 401(k) for a while, who tend to be shocked when they realize how the state will tax what they leave behind.
The impact of crossing the abyss is serious. At the brink, a $7,717,500 estate would pay a tax of just $49,980 – just 0.6 percent. An estate worth one dollar more is over the edge and would yield $734,580 – a hefty 9.5 percent. The difference between these two tax bills is $684,600.
How does it make sense from a policy perspective that dying with a single extra dollar would cost your heirs $684,600? Perhaps state lawmakers really want to motivate New Yorkers to reduce their net worth.
(There is no federal estate tax. Furthermore, the federal exemption amount is absurdly high. A person who dies with $14 million pays no federal estate tax.)
If you live in an $8 million mansion with no mortgage, it will be hard to avoid the cliff. You can sell or mortgage the house and give away some of the money, but be warned that non-charitable gifts made within three years of your death will be reinstated into your estate by Albany.
Another option is to donate your house to a charity with a lifetime donation. This means that you can continue to live there until you die, after which the charity will receive it. This immediately removes the property from your estate and also creates an immediate income tax deduction that can be transferred if necessary.
Donating the house also guarantees that your heirs won’t argue about it when you’re gone. But something like that never happens, right?
What we’re thinking about: If COPA (Community Opportunity to Purchase Act) is passed and nonprofits purchase some apartment buildings, the buildings will no longer have to pay property taxes. Did anyone mention the bill’s potential impact on city revenues?
Something we learned: The city does not allow lighting of buildings, such as those on the new JPMorgan Chase skyscraper Parklaan 270 — to display advertising or company branding.
Elsewhere…
Two landmark buildings are close enough to Extell Development’s project at 655 Madison Avenue to sell air rights to: 781 and 790 Fifth Avenue.
But only 790 Fifth can do that, says Wilson Parry, CEO of PropertyScout, because 781 Fifth – the Sherry-Nederland cooperative – is overbuilt. It has been there since 1927.
Barnett will also receive 129,000 square feet of development rights in exchange for making improvements to the Fifth Avenue/59th Street subway station. These improvements will benefit his building and the general public.
Closing time
Residential: The highest housing deal recorded on Tuesday was $7.3 million for a 2,488-square-foot sponsorship condominium at 50 West 66th Street in Lincoln Square.
Commercial: The best recorded commercial deal was $4.2 million for a 13-unit apartment complex at 2923 Frederick Douglass Boulevard in Central Harlem.
New on the market: The highest price for a home that came on the market was $27 million for a 5,475-square-foot condominium unit at 157 West 57th Street in Midtown. Serhant’s Nile Lundgren has the entry.
Groundbreaking: The largest new building permit submitted was for a proposed 64,675-square-foot, 74-unit project at 191 Canal/17 Cedar Street in Stapleton. Lester Katz filed the permit on behalf of Zeldy Roth.
— Matthew Elo
#Daily #Dirt #Beware #fiscal #cliff