For a non-resident, the costs of a Manhattan apartment arise at three stages. At the deal you pay a tax on the high-value purchase from 1%. Then you pay the running costs every year. And on sale you hand over 15% of the proceeds straight away — the US tax authority withholds it under FIRPTA, and refunds the excess later. Behind the asking price sits a whole set of taxes and fees at every stage. We work out the full cost of ownership.
Contents:
- At the deal: what the buyer pays
- Every year: running the apartment
- On sale: what is withheld, especially from a foreigner
- Example: a $2M apartment
- What a foreigner should keep in mind
- Popular questions
At the deal: what the buyer pays
The buyer's main tax is the mansion tax, a state tax on a high-value purchase. It applies from a price of $1M, the rate is progressive, and it is charged on the whole amount, not only on the part above the threshold.
| Purchase price | Mansion tax |
|---|---|
| $1–2M | 1% |
| $2–3M | 1.25% |
| $3–5M | 1.5% |
| $5–10M | 2.25% |
| over $10M | up to 3.9% |
On a $2M apartment that is 1.25%, or $25,000. Add the attorney's fees and the closing paperwork. A separate item is the transfer taxes (city and state, together roughly 1.4–2.1%): on a resale the seller usually pays them, but on a purchase from a developer in a new building they are often shifted to the buyer. If the deal is financed, there is also a mortgage recording tax — about 1.8–1.9% of the loan.
Every year: running the apartment
- Common charges — a monthly fee for running the building: maintenance, concierge, amenities. Usually $0.75–1.50 per square foot a month; on an apartment of about 90 m² (roughly 1,000 sq ft) that is around $9,000–18,000 a year, more in luxury buildings.
- Property tax — charged on the city's valuation, not on the sale price. A condo's city valuation in New York is far below the market price, so the tax is usually lower than a simple percentage of the price would suggest; the exact figure depends on the building and any abatements.
- Pied-à-terre — if the apartment is not your primary residence, 4–6.5% of the city valuation a year. In detail — in the article on the tax on a second home.
- Insurance for the interior — from a few hundred to a couple of thousand dollars a year.
On sale: what is withheld, especially from a foreigner
For a non-resident the main item on the way out is FIRPTA. Under federal law, when a foreigner sells US real estate the buyer withholds 15% of the sale price and pays it to the tax authority. This is not the final tax but a prepayment: the actual tax is worked out on the gain, and the difference is refunded. To have less withheld, you apply in advance for a certificate (Form 8288-B) — then the withholding is based on the expected tax, not on the whole price.
Besides FIRPTA, on sale you pay:
- Transfer taxes (city and state) — together 1.4–2.075% depending on the price; the seller pays them.
- The state's estimated tax for a non-resident — on the gain, withheld at the deal.
- The broker's commission — usually 5–6%.
- A flip tax — in some buildings (more often co-ops), a fee to the building on a sale.
In total, a seller's costs in New York come to around 8–10% of the price including the broker's commission.
Example: a $2M apartment
A rough guide for a resale, buyer a non-resident:
- At the deal: mansion tax 1.25% — $25,000, plus attorney and closing (a guide of $5,000–10,000).
- Every year: common charges and property tax depend on the building — a guide of $25,000–40,000 in total; if the apartment is not your primary residence, the pied-à-terre is added.
- On sale: FIRPTA withholds 15% of the price — on $2M that is $300,000 (refunded after the actual tax on the gain is worked out), plus transfer taxes of about 1.8% and a broker's commission of 5–6%.
What a foreigner should keep in mind
The full cost of ownership on Manhattan is not only the price and the common charges. At entry the mansion tax bites, through ownership there are the running costs and, for a non-primary home, the pied-à-terre, and on the way out 15% of the price is withheld from a non-resident straight away. That is why a Manhattan apartment is counted over the whole holding period and the exit is planned in advance, not on the day of sale. Which form of ownership suits a foreigner better, a condo or a co-op, is covered in a separate article on condos and co-ops.
Popular questions
What tax does the buyer pay at the deal?
The mansion tax — from 1% at a price of $1M, on the whole amount. On a $2M apartment that is $25,000.
Is it true that 15% is withheld on sale?
Yes. Under FIRPTA, 15% of the sale price is withheld from a foreigner as a prepayment of tax; the excess is refunded. The withholding can be reduced by filing a certificate (Form 8288-B) in advance.
Why is the property tax lower than you expect?
It is charged on the city's valuation of the condo, which in New York is far below the sale price.
Can the costs on sale be reduced?
Partly: a FIRPTA certificate lowers the withholding, and the commission and the structure of the deal are agreed in advance.
