Overview
As part of the Fiscal Year 2027 budget, New York State has enacted a new annual surcharge on high‑value New York City homes that are not used as a primary residence, commonly referred to as the “pied‑à‑terre tax.” The surcharge is codified as Article 30‑C of the New York Tax Law and is added on top of existing New York City real property taxes. It takes effect July 1, 2026, and, unless extended, expires on June 30, 2031.
Covered Properties and Two‑Phase Rollout
The surcharge reaches two broad categories of property: Class 1 properties, which are one‑ to three‑family homes, and Class 2 properties, which include condominiums and cooperatives. The law phases in over two stages for condos and co‑ops, but one‑ to three‑family homes are treated consistently from the beginning.
Some property sits outside the surcharge entirely. Vacant land is not subject to the tax. Units for which a required certificate of occupancy has not yet been issued, and unsold sponsor units under an offering plan, are also excluded.
Class 1 Properties: One‑to Three‑Family Homes
For one‑ to three‑family homes, the surcharge applies once the market value that the New York City Department of Finance (“DOF”) assigns to the property exceeds $5 million. Currently, and for the lifespan of this surcharge, one‑ to three‑family homes, or Class 1 properties, are valued using the comparable‑sales approach.
The surcharge uses a tiered rate structure. No surcharge applies to the first $5 million of market value. Value between $5 million and $15 million is taxed at 0.8%. Value between $15 million and $25 million is taxed at 1.05%. Value above $25 million is taxed at 1.3%. Each rate applies only to the value within its band. For Class 1 homes, this valuation method and rate schedule remain in place throughout the life of the tax.
Class 2 Properties: Condominiums and Cooperatives
Condos and co‑ops are subject to a separate, two‑phase framework, reflecting the fact that the DOF values these properties differently from one‑to three‑family homes. Under current New York City assessment practice, the DOF typically values condos and co‑ops using an income‑capitalization method as if they were rental buildings.
In Phase 1, which covers fiscal years 2026 through 2028, the DOF continues to use this existing method for condos and co‑ops. During this period, the surcharge applies based on valuation with a separate rate structure. The first $1 million of value is exempt. Value between $1 million and $3 million is taxed at 4%. Value between $3 million and $5 million is taxed at 5.25%. Value above $5 million is taxed at 6.5%. These rates are higher than the one-to three family homes schedule because they apply to a lower valuation base. In Phase 2, beginning with the 2028‑2029 fiscal year, the DOF is expected to shift condos and co‑ops to a comparable‑sales valuation approach. Once that transition occurs, condos and co‑ops fall under the same $5 million threshold and the same tiered 0.8% to 1.3% rate schedule that applies to one‑to three‑family homes. From that point forward, high‑value houses, condos, and co‑ops will all be taxed under one uniform system.
Cooperatives present a practical wrinkle. For property tax purposes, a co‑op building is assessed as a single parcel, so the pied‑à‑terre surcharge attributable to non‑primary residence units is added to the building’s tax bill rather than billed separately to individual shareholders. In practice, the co‑op corporation will need to pass through the appropriate surcharge amounts to the tenant‑stockholders whose shares correspond to those units and reflect that obligation in its building policies and billing procedure.
Exemptions and the Primary Residence Standard
The central exemption under the statute turns on whether a property is used as a primary residence. A property is not subject to the surcharge if it is occupied as the primary residence of the owner. It is also exempt if it is occupied as the primary residence of an immediate family member of the owner, which the statute defines to include a spouse, child, sibling, parent, grandparent, or grandchild.
In deciding whether a property qualifies as a primary residence, DOF is directed to consider a range of factors. One important factor is whether, in the aggregate, the property was occupied for a majority of the days in the calendar year by the owner or a covered family member. Other signals of residency may also be relevant, such as how the owner reports their permanent home for tax purposes.
A separate exemption applies for certain rented properties. A property is exempt from the surcharge if it is leased under a bona fide, arm’s‑length lease for a term of at least one year to a tenant who uses the property as the tenant’s primary residence. This exemption is driven by actual use. A unit that simply sits vacant will not qualify. Similarly, a property that is leased to someone who uses it as their own second home does not qualify, even if that person is otherwise a New York resident.
Ownership Structures: Trusts, LLCs, and Look‑Through Rules
Many New York City second homes are owned through trusts, limited liability companies, partnerships, or corporations. The statute includes look‑through provisions so that the use of an entity or trust does not automatically place a property outside the scope of the tax.
For property held by a trust, the law looks to the beneficial owners of the trust. Where there are identifiable beneficial owners, they may be treated as the relevant owners for purposes of determining primary‑residence status. For property held through an LLC, partnership, or corporation, the statute generally looks to the majority owners of the entity. In structures where no single person holds a majority interest, or where ownership is widely shared, no individual may qualify as a covered owner based on entity ownership alone, which can affect whether the primary‑residence exemption is available. Some administrative details about how DOF will apply these look‑through rules, particularly in more complex structures, remain to be clarified through guidance.
Certifying Primary Residence and DOF Determinations
DOF will make an annual initial determination, based on information available to it, as to whether each covered property with value at or above the applicable thresholds is a non‑primary residence subject to the surcharge. For the fiscal year beginning July 1, 2026, DOF must notify owners of its initial determination no later than August 30, 2026. Owners then have an opportunity to submit proof that the property qualifies as a primary residence or falls within the rental exemption.
DOF may require owners to certify primary‑residence status and to provide supporting documentation. After considering the owner’s submission and any other information available to it, DOF will issue a final determination.
Penalties, Enforcement, and Key Dates
The statute attaches meaningful penalties to inaccurate or misleading certifications. Following notice and an opportunity to be heard, DOF may impose a penalty of up to 50% of the surcharge if it finds that a certification or supporting documentation contained information that was materially inaccurate or misleading, and that the information was provided negligently or in bad faith. A similar penalty may be imposed where a condominium unit was divided into more than three units, in bad faith, for the purpose of avoiding the surcharge.
DOF may audit certifications and supporting documentation for up to six years after submission. In connection with such audits, DOF may subpoena records and require additional information as part of its determination.
Once imposed, the surcharge is added to the property’s statement of account and is due in the same manner as New York City real property taxes. For the fiscal year beginning July 1, 2026, the surcharge is due and payable on January 1, 2027. In later years, it follows the same semi‑annual installment schedule that applies to regular New York City property taxes. The surcharge is administered and enforced as if it were a property tax, but no existing abatement, credit, or exemption reduces it.