New York Codes, Rules and Regulations
Title 20 - DEPARTMENT OF TAXATION AND FINANCE
Chapter IV - Sales And Use And Other Miscellaneous Taxes
Subchapter D - Mortgage Recording Taxes
Part 651 - Credit Allowed For Mortgage Tax Paid To First Purchasers Of Condominium Units
Section 651.2 - Computation of credit
Real Property Law, § 339ee
The amount of credit as described in section 651.1 of this Part, is determined by multiplying the basic tax and, where applicable, the additional tax, the City of New York tax, the City of Yonkers tax and the Broome County tax paid upon the recording of such a construction or blanket mortgage, by the purchaser's pro rata percentage of interest in the common elements of the condominium.
Example 1:
A $1 million construction mortgage on real property located in New York City is recorded on January 1, 1991. The proceeds of the mortgage are applied to the construction of a building, which consists of 10 residential condominium units. Each unit is allocated 10% of the common elements as provided by the condominium declaration. Upon the recording of the construction mortgage $5000 of basic tax, $2500 of additional tax, and $17,500 of City of New York tax was paid.
the first unit in the newly constructed building is sold on August 1, 1991. The purchaser, Mr. Jones, borrows $400,000 from Bank X to finance his purchase, and gives a mortgage to Bank X as security for the amount borrowed. When the $400,000 mortgage is recorded, the taxes due and credit are computed as follows:
| Basic tax on $400,000 mortgage | $2,000 |
| Less: Credit allowed against basic tax (10 percent × $5000) | 500 |
| Basic tax due | 1,500 |
| Additional tax on $400,000 mortgage | $1,000 |
| Less:* Exclusion for first $10,000 of mortgage debt | 25 |
| Balance | 975 |
| Less: Credit allowed against additional tax (10 percent × 2500) | 250 |
| Additional tax due | 725 |
| Special additional tax on $400,000 mortgage (no credit allowed) | 1,000** |
| City of New York tax on $400,000 mortgage ($1 per $100 rate) | 4,000 |
| Less: Credit allowed against City of New York tax (10 percent × 17,500) | 1,750 |
| City of New York tax due | 2,250 |
| Total mortgage recording taxes due | $5,475 |
* Since the real property covered by the mortgage is a one family residence, the first $10,000 of principal debt secured by the mortgage is deducted when computing the additional tax. (See section 642.2[b] of this Title.)
** Since the $400,000 mortgage is of real property which is principally improved with a residential dwelling unit, Bank X, the mortgagee, must pay the special additional tax. (See section 642.2[b] of this Title.)
Example 2:
Same facts as in Example 1, except that the first unit in the building is sold on February 1, 1993. Since the first unit is sold more than two years after the construction mortgage was recorded, no credit is allowed.
Example 3:
Same facts as in Example 1, except that the construction mortgage was recorded on May 1, 1989. Since the construction mortgage was recorded prior to July 1, 1989, the credit is allowed regardless of the fact that the first unit of the condominium is sold more than two years after the date that the construction mortgage was recorded.
Also, the City of New York tax payable on the recording of the construction mortgage would be $12,500 based on the rate in effect on May 1, 1989, resulting in the credit with respect to such tax being $1,250 (10 percent × 12,500).
Footnotes
* Since the real property covered by the mortgage is a one family residence, the first $10,000 of principal debt secured by the mortgage is deducted when computing the additional tax. (See section 642.2[b] of this Title.)
** Since the $400,000 mortgage is of real property which is principally improved with a residential dwelling unit, Bank X, the mortgagee, must pay the special additional tax. (See section 642.2[b] of this Title.)
