New York State has enacted a new annual tax surcharge — known as the Pied-à-Terre Tax — targeting non-primary residences in New York City. Signed into law on May 28, 2026, as part of the 2026–2027 New York State Budget Bill, the tax adds Sections 1350–1356 to the New York State Tax Law. Here are the key facts:
What Is It?
- The Pied-à-Terre Tax applies to any “covered owner” of a “covered property” that does not qualify as a primary residence.
- Covered owners include owners of Class 1 residential property (1–3 family homes), co-op shareholders, condo unit owners, and in some cases, majority or beneficial owners of entities or trusts that hold covered residential property.
Who May Be Exempt?
Your property generally will not be subject to the surcharge if it is used as the primary residence of:
- One or more covered owners;
- An immediate family member of a covered owner; or
- A tenant or subtenant who occupies the property under a bona fide, arm’s-length lease with a term of at least one year.
Tax Rates and Thresholds
- Phase 1 (July 1, 2026 – June 30, 2028): Class 1 homes valued at $5 million or more face rates from 0.8% to 1.3%; condos and co-ops valued at $1 million or more face rates from 4% to 6.5%.
- Phase 2 (July 1, 2028 – June 30, 2031): The threshold rises to $5 million for all property classes, with rates aligning to the Class 1 structure.
Revenue and Concerns
- The tax is projected to generate at least $500 million annually for New York City.
- The City Comptroller’s report notes that actual revenue could fall to $340–$380 million depending on behavioral changes such as renting, selling, or occupancy shifts.
- Significant administrative, valuation, and legal challenges remain unresolved, and litigation.
What This Means for You
If you own a high-value second home, co-op, or condo in New York City, this law may directly affect your tax obligations beginning July 1, 2026. Proactive tax planning is critical. In addition, for taxpayers who have received correspondence relating to possibly being subjected to the surcharge tax there is a surcharge exemption application that can be submitted online via NYC Department of Finance by September 18, 2026. This applies to residential homes and condos, including cooperative units.
Contact DiSanto, Priest & Co. today to discuss how the Pied-à-Terre Tax may impact your real estate holdings and overall tax strategy. Please call us at (401) 921– 2000 or contact us here.