The New York State Department of Taxation recently issued a Letter Ruling–an official document that provides guidance on how certain tax laws are to be interpreted and applied– stating that licenses for parking and storage spaces are now classified as interests in real property. This classification has significant tax implications relating to the sale and purchase of condominiums that often include licenses for parking or the use of storage bins.
Under New York State Tax Law Article 31, if an agreement to purchase a condominium also includes an agreement to purchase a license for a parking space and/or a storage unit, the sums paid for these licenses must be aggregated with the total sale price of the condominium unit. Consequently, any payments made for licenses that allow the use or occupancy of parking or storage spaces are treated as real estate. Therefore, the licenses may be subject to real estate transfer taxes. The Letter Ruling has far-reaching implications for condominium purchasers and sellers. If the combined consideration (condominium unit price, parking space license price, and storage unit license price) amounts to $1 million or more, the mansion tax will be applicable. The mansion tax is a separate tax imposed on residential property sales where the total consideration exceeds the specified threshold of $1 million or more. The percentage of tax a purchaser will pay will be directly tied to the purchase price. In 2023, the New York City mansion tax ranges from 1% of the sales price to 3.9% of the sales price.
It is important for individuals involved in such transactions, including buyers, sellers, and real estate professionals, to be aware of these changes to ensure compliance with the updated tax regulations. At Guzov, LLC it is our goal to make sure our clients are up to date on all the laws that impact their purchases and sales of real estate.
If you would like to discuss how the changes will affect your future condominium purchase or sale, please contact us to schedule a consultation.