$1 million doesn't buy a mansion on Long Island, but buyers pay a 'mansion tax' anyway

Ted Kritikos, of Daniel Gale Sotheby's International Realty, recently helped some Long Islanders purchase a four-bedroom, three-bathroom home in Bayville.

Built in 1994, the Colonial-style house totals 2,400 square feet, and sits on a 5,400-square-foot lot. Along with being of modest size, the house could use some updates to the kitchen and bathrooms, Kritikos said.

Yet as part of closing costs, the buyers had to pay an additional tax of 1% of the $1.05 million sale price, as mandated by New York State law. Known as mansion tax, it applies to buyers of homes that sell for $1 million or more.

"They had to pay that mansion tax and they were like, 'Hey, we don't feel like we're in a mansion here,' " Kritikos recalled. 

The New York State mansion tax was implemented in the summer of 1989. In more than three decades, it has never been adjusted for inflation, and its "mansion" title has remained.

Then-Gov. Mario M. Cuomo introduced the so-called mansion tax in January 1989 to raise money to balance the state budget. In February 1989, the median price for a single-family home in Nassau County was $188,000, and $152,000 in western Suffolk, Newsday reported at the time.

Some local real estate professionals say that the $1 million threshold should be raised to account for the current market, but so far there has been no state-level traction.

In November, the median home sale price in Suffolk County reached an all-time high of $725,000, with $840,000 as the median sale price in Nassau, according to data from data from OneKey MLS. According to an analysis of OneKey MLS data on single-family home sales, 22.8% of Long Island home sales between January and November 2025 closed for $1 million or more.

What's a 'mansion?'

"The word 'mansion' is sort of an old-timey word," said Jonathan Miller, CEO of real estate appraisal firm Miller Samuel. "The tax is based purely on price or value; it's not based on whether the home has a certain look to it. When I think of a mansion in Long Island, I think of something that is 5,000 square feet or over, with more than an acre of land."

But in Long Island's hot market, characterized by limited inventory and fierce competition, home prices have shot up. In Nassau, houses listed around the $1 million price point often garner "multiple bids," said Kritikos, who has offices in Great Neck and Greenvale.

Kritikos said he doesn't see the demand easing anytime soon because there are plenty of people holding out on their home search in hopes of interest rates dropping.

"As soon as rates come down, we expect even more competitive situations to arise," he said, "because all those buyers that were on the sideline are coming right back to the forefront, competing for homes and driving up prices on those homes." (The average long-term mortgage rate in the U.S. is 6.18%, as of late December).

Perhaps something called a "mansion tax" should refer to property size instead of price, Kritikos added.

"Mansion tax should probably be tied to square footage, and that square footage, in my mind, is closer to 4,000 square feet," he said. "That's kind of the entry point in most neighborhoods and most home styles where someone could confidently say, 'That's a mansion.' "

For Kritikos' clients who are looking to become first-time homeowners, the mansion tax usually comes as a surprise, he said: "It's something I have to explain right away."

What $1 million can buy

Zachary Scher, a real estate agent with Signature Premier Properties in East Setauket, makes sure his clients are aware of the tax when they make offers of $1 million or more.

To avoid paying that 1% tax, "you see a lot of people, when they're making offers, try to keep right under that million-dollar threshold," Scher said. "And from time to time, it affects pricing."

His team recently sold a home in Dix Hills for $1.05 million — a split-level, totaling about 2,000 square feet, Scher said. "When people think of mansions, they think of these giant, 5,000-square-foot-plus houses, and that's not really the case in most areas," he added.

"They've got to either increase the threshold in terms of what that price point is, or they've got to change the name of what tax is," Scher said. "Calling it a 'mansion tax' doesn't make sense, because $1 million doesn't go as far as it used to on Long Island."

Enzo Morabito is a real estate agent with Douglas Elliman Real Estate who specializes in luxury, waterfront homes on the East End. He lives and works in Westhampton Beach.

"If the starting point is a million bucks, that's a starter home here," he said.

The mansion tax, along with other fees Long Islanders might run into at the closing table, "that's a down payment anywhere else," Morabito said.

Changes ahead?

In New York State, the mansion tax is likely to stay just the way it is, for now. To date, one legislator's effort to adjust the tax hasn't gained traction at the State Capitol.

Assemb. Nader Sayegh (D-Yonkers) is sponsoring a bill that would change the threshold for when the tax kicks in, from $1 million to $2 million.

According to an analysis of OneKey MLS data on single-family home sales between January and end of November,

22.8% of houses sold for $1 million or more

and

6.2% sold for $2 million or more.

"This original tax was introduced in 1989, at a time when $1 million is the modern-day equivalent to $2.23 million after inflation," Sayegh wrote in a memo accompanying the bill. "Many properties that are currently subjected to this additional tax rarely classify as 'mansions,' but are instead highly priced due to the recent rising trend in real estate prices."

But that bill has gone nowhere in the State Assembly in five years, not even advancing through the Ways and Means Committee, much less getting a vote of the full Assembly.  

In addition, Sayegh doesn't currently have a co-sponsor to introduce the bill in the state Senate, which indicates no one wants to touch it right now. Sayegh was not available to answer questions about why the bill hasn't advanced.

Low inventory at the high end of the market added pressure on home prices in 2025, Miller said, and that will only follow into the new year.

"Prices are already at record levels, and there's every reason to think that in 2026 they will continue to be at or near record levels, given the momentum and the drivers of the high-end market on Long Island," he said. "So, it bodes well for the collectors of the mansion tax."