New York Enacts the Pied-à-Terre Tax What High-Value Second-Home Owners Need to Know

New York State has enacted a new annual surcharge on certain high-value New York City residential properties that are not used as a primary residence, otherwise commonly known as the "pied-à-terre" tax. The measure was approved by the State Legislature on May 27, 2026 and signed into law by Governor Kathy Hochul as part of the fiscal year 2026–2027 state budget. The surcharge takes effect July 1, 2026 and is currently scheduled to sunset on June 30, 2031.

For owners of high-value second homes in the five boroughs, the surcharge is recurring. It applies every year, separate from and in addition to existing property taxes. This is not a one-time transfer tax.

Who Is Affected

The surcharge applies to "covered property" — NYC residential property that is not a primary residence and that meets specified market-value thresholds:

• Class One properties (generally one-, two-, and three-family homes): market value of $5 million or higher.

• Class Two properties (generally condominium and co-op units): market value of $1 million or higher during the first phase, rising to $5 million or higher in the second phase.

How the Surcharge Is Calculated

The surcharge is phased in, with different thresholds, rates, and valuation methods over two periods: Phase One (July 1, 2026 – June 30, 2028) and Phase Two (July 1, 2028 – June 30, 2031).

Phase One — Class One (1–3 family homes):

• $5M to $15M — 0.8%

• Above $15M to $25M — 1.05%

• Above $25M — 1.3%

Phase One — Class Two (condos and co-ops):

• $1M to $3M — 4%

• Above $3M to $5M — 5.25%

• Above $5M — 6.5%

Phase Two — Class One and Class Two (single schedule):

• $5M to $15M — 0.8%

• Above $15M to $25M — 1.05%

• Above $25M — 1.3%

The higher Phase One rates for condos and co-ops are intended to account for the discounted assessed values the City currently assigns to those units. In Phase Two, the Department of Finance (DOF) will value condos and co-ops using a comparable-sales method, and the rates and thresholds for both classes converge.

What Is Not Covered

The surcharge does not apply to:

• Property used as a primary residence, or property below the applicable value threshold;

• Vacant land;

• Unsold sponsor inventory in newly developed condominium or co-op buildings subject to an offering plan; and

• Property for which a temporary or permanent certificate of occupancy is required but has not yet been issued.

A property qualifies as a primary residence if it is used as such by the owner, by an immediate family member (spouse, child, sibling, parent, grandparent, or grandchild), or by a bona fide, arm's-length tenant under a lease of at least one year. Primary-residence status is assessed based on use as of January 5 of the preceding fiscal year — for the 2026–2027 year, that date is January 5, 2026.

Key Dates

• July 1, 2026 — Surcharge takes effect.

• August 30, 2026 — Deadline for the DOF to issue initial primary-residence determination notices for the 2026–2027 year, giving owners an opportunity to submit proof of primary residence.

• January 1, 2027 — Surcharges for the 2026–2027 fiscal year become due.

• June 30, 2031 — Current scheduled sunset.

What Owners Should Consider Now

The legislation sets the framework, but the DOF is expected to issue additional guidance on valuation, ownership structures, changes in ownership, and enforcement. Owners of potentially affected properties may wish to review how their property is classified and valued, confirm whether it qualifies as a primary residence, and be prepared to respond to a DOF determination notice with supporting documentation.

If you own, or are considering purchasing, a high-value New York City residence that is not your primary home, we would be glad to discuss how this surcharge may affect you and your planning options.