New York State has officially enacted an annual Pied-à-Terre Tax (technically a “City Surcharge on Property That Does Not Serve as a Primary Residence”). Signed into law as part of the Fiscal Year 2027 state budget, the tax takes effect July 1, 2026, and is scheduled to sunset on June 30, 2031.
The tax targets luxury, non-primary residential real estate within New York City to help close the city’s budget gap. It is expected to impact roughly 10,000 properties and generate up to $500 million annually.
1. Who and What Is Affected?
The tax is levied strictly on high-value properties that do not serve as the owner’s primary residence.
- Target Entities: Individual second-home owners, international investors, and properties held via corporate structures like LLCs, partnerships, or trusts.
- Primary Residence Definition: The NYC Department of Finance (DOF) will primarily cross-reference the address listed on the owner’s New York State tax return and tracking metrics. If an NYC resident owns multiple homes in the city, only one qualifies for an exemption.
2. The Two-Phase Implementation
Because NYC’s current property assessment system historically undervalues condos and co-ops, the tax is structured in two distinct phases to transition toward market valuations.
Phase 1: July 1, 2026 – June 30, 2028
During the first two years, the tax uses existing DOF valuations. Because condos/co-ops are assessed significantly lower than actual market rates, they have a lower entry threshold but higher tax rates to compensate:
Condominiums & Cooperatives:
- Assessed Value $1M to $3M: 4.0% annual surcharge
- Assessed Value $3M to $5M: 5.25% annual surcharge
- Assessed Value Over $5M: 6.5% annual surcharge
- 1-to-3 Family Homes:
- Market Value $5M to $15M: 0.8% annual surcharge
- Market Value $15M to $25M: 1.05% annual surcharge
- Market Value Over $25M: 1.3% annual surcharge
Phase 2: July 1, 2028 – June 30, 2031
Starting July 1, 2028, the entry threshold standardizes across all property types to a true market value (based on comparable sales data) of $5 million or more. The tax rates flatten to match the single-family scale:
- Market Value $5M to $15M: 0.8%
- Market Value $15M to $25M: 1.05%
- Market Value Over $25M: 1.3%
3. Key Exemptions
A property will be excluded from the surcharge if it meets one of the following conditions:
- Family Occupancy: Used as a primary residence by the owner’s immediate family (spouse, children, parents, siblings, grandparents).
- Long-Term Rental: Leased to an arm’s-length full-time tenant for a continuous duration of at least one year.
- Unsold Inventory: Newly developed sponsor units that have not yet been sold or transferred.
4. Billing, Collection, and Legal Risks
The surcharge will appear as a separate line item on standard NYC property tax bills.
- Deadlines: For the first fiscal year, the tax is due in full on January 1, 2027. In subsequent years, it will follow the standard semi-annual real estate tax payment schedule.
- The Co-op Board Risk: For co-ops, the bill is issued directly to the building corporation, which must then collect it from the specific non-resident shareholder. If a shareholder defaults, the city can place a tax lien on the entire building, effectively forcing co-op boards to act as financial guarantors.
5. Next Steps for Property Owners
The DOF will issue an initial “Notice of Surcharge” to affected owners by August 30, 2026. Upon receiving a notice, owners have 30 days to formally contest the determination by submitting proof of primary residency or qualifying lease agreements. [1]
To see past publications, please visit our Knowledge Center.
The information presented here should not be construed as legal, tax, accounting, or valuation advice. No one should act on such information without appropriate professional advice and after a thorough examination of the particular situation.
