New NYC Pied-à-Terre Tax: What Nonresident Property Owners Need to Know

Co-written by Jeffrey S. Gold, CPA LMC Tax Director

Co-written by David J. Neuman, JD LMC Tax & Legal Manager

As part of its Fiscal Year 2026–2027 Budget, New York enacted a new annual Pied-à-Terre Tax effective for fiscal years beginning on or after July 1, 2026. The tax targets certain high-value residential properties in New York City that are not used as the owner’s primary residence and is scheduled to sunset on June 30, 2031, if not extended.

The legislation is intended to impose an additional annual surcharge on luxury residential real estate maintained as second homes, occasional residences, or other non-primary residences, including certain condominiums, cooperative apartments, and one-, two-, and three-family homes located within New York City.

For the initial implementation period (Phase 1), the tax is generally imposed based upon New York City Department of Finance (“DOF”) assessment values and reaches rates as high as 6.5 percent for certain properties. Significant administrative guidance remains forthcoming, particularly with respect to exemption procedures, valuation methodologies, co-op administration, and some aspects of entity-owned and rental properties.

Taxable Property

The tax is imposed in addition to existing New York City real property taxes and other applicable assessments and will generally apply to:

• Condominium units located in New York City;
• Cooperative apartments located in New York City; and
• One-, two-, and three-family residential properties located in New York City.

Unlike New York State income taxes, the Pied-à-Terre Tax will not be administered by the NYS Department of Taxation and Finance. Instead, the tax will be administered and collected by the city’s DOF through its real property tax system. For condominium units, the assessment will be imposed directly against the unit owner.  For cooperative apartments, additional guidance is expected because property taxes are generally billed to the cooperative corporation, not unit occupants. It is possible that Pied-à-Terre Tax assessments may initially be imposed at the building level and subsequently allocated to affected shareholders through maintenance charges or special assessments.

Primary Residence Exception

The tax is not intended to apply to the primary residence of an owner or an owner’s family member (spouse, child, parent, sibling, etc.). Accordingly, ownership of a New York City residential property meeting the valuation threshold by a nonresident does not automatically result in tax liability. Rather, the key determination is whether the property serves as the primary residence of the owner or a qualifying family member.

To qualify, it must be occupied as a primary residence for more than half the year (generally 183 days). The DOF is expected to issue procedures allowing taxpayers to certify or otherwise demonstrate primary residence status.

Transitional Valuation Methodology

Because most New York City condominiums and cooperative apartments (known as Class 2 homes) are assessed at values significantly below actual market value, the legislation employs a transitional framework that applies relatively high tax rates to existing DOF assessment values until more realistic values are established. Phase 1 applies only to fiscal years 2026-2027 and 2027-2028.  During this period, the DOF assessment will govern regardless of purchase price or other fair market valuation. The following rates apply to co-ops and condos during Phase 1:

DOF Assessed Valuation          Rate

1 to 3 family homes (Class 1 homes) carry more realistic DOF assessments, and are taxed based on the following rates during Phase 1:

DOF Assessed Valuation           Rate

Beginning with Fiscal Year 2028–2029 (July 1, 2028), the DOF will shift to a comparable sales-based methodology for valuing Class 2 properties. The second chart above (beginning at $5,000,000) will then apply to all property types.

Entity-Owned Properties

The legislation was drafted to apply broadly to residential properties owned directly or indirectly through entities.

The statutory provisions generally contemplate attribution to beneficial owners, shareholders, partners, members, and beneficiaries associated with:

• Limited liability companies;
• Partnerships;
• Corporations; and
• Trusts

Accordingly, ownership through an LLC, partnership, corporation, or trust does not remove a property from the scope of the tax.

Taxpayers should not assume that transferring a residential property to an entity will avoid application of the surcharge.  Additional regulations are expected to address attribution rules, reporting requirements, and tiered ownership structures.

Rental and Investment Properties

An important practical consideration is the treatment of income-producing rental properties. The legislative purpose of the tax is to target luxury residential properties maintained as second homes or occasional residences rather than properties occupied by tenants under bona fide rental arrangements.

Based on the statutory language, properties subject to bona fide leases of one year or more to unrelated third-party tenants as their primary residences are exempt from the tax. Shorter term rentals, and vacant rentable properties, are not exempt.

Conclusion

The newly enacted New York City Pied-à-Terre Tax represents a significant annual surcharge on certain high-value New York City residential properties that are not used as the owner’s primary residence. The tax becomes effective for fiscal years beginning on or after July 1, 2026 and is expected to be administered and collected by the DOF through the City’s property tax system.

Although the law clearly targets luxury second homes and non-primary residences, important questions remain, including administrative procedures, the primary residence certification process, and co-op billing mechanics. Taxpayers with potential exposure should review their ownership structures, residency positions, and DOF valuations and continue to monitor future guidance as implementation of the tax progresses.

Taxpayers should be aware that positions taken for Pied-à-Terre Tax purposes (e.g., claiming a property is a primary residence) may be considered in connection with New York State and New York City residency determinations for income tax purposes. Care should be taken to ensure consistency across filings. Please feel free to reach out to your LMC professional with any questions regarding this newly enacted tax.