Thinking of buying a home on Long Island this year? Make sure you understand the taxes involved.
The Long Island real estate market is expected to be hot this year. Despite all the chaos of last year, housing has been heating up. Many more will likely relocate from Manhattan to Long Island in 2021. More incoming buyers may choose LI over other locations in NY.
This is forcing up the prices of homes. While it may still be worth the move, make sure you are also keeping in mind the tax bills that will come with your new home purchase.
Real Estate Transfer Taxes
When a home in New York is bought and sold there are transfer taxes due.
There are actually several layers of these taxes, some of which are triggered depending on the price of the property.
The seller often pays some of these taxes. Though if they don’t pay them, or are exempt, then you as the buyer have to cover them all.
As laid out by the Department Of Taxation and Finance lays out, there is a base transfer tax. Plus two potential additional base tax rates, a supplemental tax and mansion tax.
There is also a tax on any mortgage financing used to buy a home in NY.
Annual Property Taxes
Then every year you own the property you will pay annual property taxes. Think of this like rent to the government.
These taxes are based on a combination of how much the local county assesses your home’s value at for tax purposes, and the current tax rate. This tax bill is actually made up of a series of smaller taxes. Most notably the school district tax.
Be sure the previous owner has paid up any past due property taxes by the time to close on the property, or you will be liable to pay them. At the closing you will also pay into escrow a prorated amount to cover the upcoming property tax bill.
These Taxes Are Always Going Up
While some other states and countries are trying to reduce or eliminate property taxes, they always seem to just keep going up on Long Island.
Make sure you budget for this when buying your home here. If you push yourself to your financial limit at closing, you will likely be in the red by the next year due to rising taxes.
The new purchase price recorded for your home is likely to trigger a much bigger property tax bill than the previous owner had. Any improvements you make to the property will also add to this bill.
What Happens If You Don’t Pay Your Property Taxes
If you don’t pay your property tax bill on time a lien will be filed against your home. You can’t sell or refinance your home until this is paid off. You will also pay financial penalties and interest based on bids at auction by investors. If you still can’t catch up your home will be auctioned off for the amount due on these taxes and you lose the home.
You Can Challenge Your Property Tax Bills
Not only can you, but you should challenge your annual property tax bill and assessment. Almost half of all annual bills here are wrong every year. They are flawed and overinflated. You can be eligible for exemptions and a reduction in your bill. This can mean thousands of dollars in savings each year.