New York City’s long-discussed “pied-à-terre tax” is now moving into its first year of implementation. Officially called the Non-Primary Residence Property Surcharge, the new annual tax took effect this year and is designed to apply to certain higher-value residential properties that are not being used as a primary residence.
One of the most important things to understand from the outset is that, for the first two years, the tax is based on the property’s value as determined by the NYC Department of Finance (DOF) for property-tax purposes, not what the property would necessarily sell for today. This distinction is especially important for condos and co-ops, where DOF valuations can be substantially lower than actual market value. In fact, DOF says that, generally, a condo or co-op it values at $1 million is comparable to a single-family home valued at $5 million or more.
There has already been quite a bit of confusion surrounding the new tax, including who may be subject to it, how exemptions work, and how it will ultimately be administered. The city has continued to provide additional guidance as the rollout moves forward, and some deadlines and details have already changed.
So, with the important caveat that this remains an evolving process, here is our best summary of what we know today. We will continue to follow the implementation closely and keep you updated if and when the rules, deadlines or guidance change.
Who Could Be Subject to the Tax?
For the 2026–27 and 2027–28 property tax years, the surcharge potentially applies to:
- 1–3 family homes: DOF market value of $5 million or more
- Condos and co-ops: DOF market value of $1 million or more
Again, DOF market value should not be confused with the property’s current open-market value or likely sale price.
This is particularly relevant for condos and co-ops because New York State law requires them to be valued differently from single-family homes. Rather than simply looking at comparable apartment sales, DOF generally values condos and co-ops based on the income they might generate if they were rental properties. As a result, the city’s valuation can be significantly below the property’s actual market value.
DOF specifically notes that a condo or co-op with a $1 million DOF market value is generally comparable to a single-family home valued at $5 million or more.
And meeting one of these value thresholds does not automatically mean an owner will owe the tax. The property also must fail to qualify for a primary-residence exemption.
What Counts as a Primary Residence?
Based on the city’s current guidance, a qualifying property may be exempt from the surcharge if it serves as the primary residence of:
- The owner
- A tenant or subtenant
- An immediate family member of the owner
- Individuals who collectively hold a majority interest in an LLC, corporation or partnership that owns the property
- A qualifying beneficiary or beneficiaries of certain trusts
In other words, the tax is intended primarily to apply to higher-value homes being maintained as true second residences, rather than every high-value property whose owner receives a notice from the city.
Owners seeking an exemption may need to provide documentation supporting primary residency. Depending on the circumstances, that could include a recent federal or state tax return, driver’s license or other DMV identification, along with additional documentation for tenants, family members, trusts or entity-owned properties.
How Much Could the Tax Be?
This is another area where the difference between DOF valuation and actual market value is critical.
For the 2026–27 and 2027–28 property tax years, the surcharge is calculated using the property’s DOF market value, not its current sale price or an appraisal of what it would sell for on the open market.
For 1–3 family homes, the current rates are:
$5M–$15M DOF value: 0.80%
$15M–$25M: 1.05%
$25M+: 1.30%
For condos and co-ops, the current rates are:
$1M–$3M DOF value: 4.00%
$3M–$5M: 5.25%
$5M+: 6.50%
At first glance, those 4%–6.5% rates for condos and co-ops can look extraordinarily high. But they are not percentages of what your apartment is worth on the open market. They are applied to DOF’s much lower property-tax valuation.
For example, a condo or co-op worth several million dollars on the open market could have a DOF market value far below its likely sale price. This difference is one of the main reasons the condo and co-op thresholds and rates look so different from those for 1–3 family homes.
Under the law as it currently stands, this structure is also expected to change. Beginning in July 2028, condos and co-ops are scheduled to move to a comparable-sales valuation system for purposes of this surcharge, with a $5 million threshold and the same 0.80%, 1.05% and 1.30% rate structure used for 1–3 family homes.
The surcharge is currently scheduled to remain in place through June 30, 2031, although, as with other aspects of the rollout, legislation and implementation can change.
Receiving a Notice Doesn’t Necessarily Mean You Owe the Tax
This may be the most important point for owners right now.
The Department of Finance has identified properties that may fall under the new surcharge, but receiving a notice does not necessarily mean that an owner will ultimately have to pay it.
Owners who believe their property qualifies as a primary residence can apply for an exemption and provide supporting documentation. The city has already adjusted its timeline during the rollout, and the current deadline to submit an exemption application is October 6, 2026.
The Department of Finance will then review those applications and make a determination. Owners who are denied an exemption may also have an opportunity to appeal.
Co-ops Add Another Layer
As with many things in NYC real estate, co-ops make the process a little more complicated.
A condominium generally receives its own property-tax bill, allowing a surcharge to be billed directly to the unit. A co-op building, however, is generally treated as a single tax lot. That means the city bills the cooperative corporation, which then has to allocate and collect the applicable surcharge from individual shareholders.
This has raised practical questions for co-op boards and managing agents about billing, collection and how disputes may ultimately be handled. REBNY and real estate attorneys have also raised concerns about some of the administrative complications that could arise as the new system is put into practice.
What Could This Mean for Buyers and Sellers?
This is probably the area where we have the most still to learn.
The tax is new. The first exemption process is underway and there simply isn’t enough real-world experience yet to know how much of an impact it will have on buyer behavior or the higher end of the NYC market.
Attorneys have also raised questions about how the surcharge could affect future transactions, including what documentation buyers may request from sellers regarding a property’s previous use and how properties held in trusts or other estate-planning structures will be treated. Some of these issues may become clearer as the city administers the tax and, potentially, as questions are addressed through appeals or the courts.
For now, buyers considering a higher-value property as a second home should be aware of the potential surcharge when calculating carrying costs. Owners who have received a notice should review the city’s current guidance carefully and determine whether they may qualify for an exemption.
Looking Ahead
There is still a lot we don’t know about how the pied-à-terre tax will work in practice.
The outline here reflects the information and guidance available today, but this is a new program and has already seen the city clarify and adjust parts of the implementation process. It would not be surprising to see additional guidance, changes or legal questions emerge as the first tax year progresses.
We will continue following the rollout closely and will keep you updated as we learn more. For anyone who believes their property may be affected, it is also a good idea to consult with their attorney, accountant or tax professional about their individual situation.
References & Additional Information
NYC Department of Finance: Non-Primary Residence Property Surcharge
https://www.nyc.gov/site/finance/property/non-primary-residence-surcharge.page
Real Estate Board of New York (REBNY): Second-Home Annual Tax Tools & Information
https://www.rebny.com/second-home-annual-tax-tools/
Office of the NYC Comptroller: The Pied-à-Terre Tax and Its Potential Revenues
https://comptroller.nyc.gov/reports/the-pied-a-terre-tax-and-its-potential-revenues/