With Summer, the Pied-à-Terre Tax Is Here

By Juliya L. Ismailov, Joshua Hager, and Sarah B. Gleit

After years of contemplation, last week New York lawmakers enacted an annual "pied-à-terre" tax under the Fiscal Year 2027 State budget on second homes that have fair market value above certain thresholds. The term "pied-à-terre” is French for "foot on the ground," meaning that the tax applies to secondary residences used periodically, or held for investment purposes, by individuals who primarily live elsewhere.

Phased Rollout

​This annual property tax surcharge will take effect in two different phases, starting on July 1, 2026:

(i) in tax years 2026-2027 and 2027-2028, condos and co-ops assessed at more than $1 million by the city’s Department of Finance will be subject to the tax at the rate of:

• 4% a year on properties worth between $1 million and $3 million;
  
• 5.25% on properties worth between $3 million and $5 million; and
  
• 6.5% on properties worth above $5 million.

(ii) starting in the 2028-2029 tax year, Department of Finance property values will be adjusted up to comparable sales, to correct the historically 10% or more undervaluation for tax purposes.

(iii) after the valuation adjustments:

• properties worth between $5 million and $15 million will be subject to a tax rate of 0.8%;
  
• properties between $15 million and $25 million will be taxed at 1.05%; and
  
• properties over $25 million will be taxed at 1.3%, according to the budget plan.

Exemptions

​The new law exempts properties that fall into the following categories:

(i)  the primary residence of at least one owner, or an immediate family member of the owner (defined to include a spouse, child, sibling, parent, grandparent, or grandchild).

(ii) property rented to a NYC primary resident who uses it as a primary residence.

"Primary residence" is defined in 19 RCNY § 19-01 as:

(i) a permanent place of abode where an individual resides or intends to reside more than 183 days in the 12 months;

(ii) additional factors include address on tax returns, voting registration and motor vehicle registration, driver's license, or other documents filed with a public agency, and also utility bills. The determination of primary use by the owner or tenant of the property as primary residence will be made by a look-through method and without regard to ownership of the property by a limited liability company, trust, partnership or other entity.

Owner Notification

​By August 30, 2026, the Department of Finance is scheduled to notify owners of properties subject to the new pied-à-terre tax. The determination can be challenged by submitting proof of primary residence. 

Market Response

​The potential market effects are hard to predict, as second-home owners weigh several competing considerations. Will multi-state real estate owners (re-)establish NYC primary residency in order to avoid the new annual tax, or will they sell, or not purchase, NYC property and part ways with the city?  The former option, of claiming NYC residency, comes with tremendous strings of additional annual income tax (combined NYS and NYC maximum individual tax rate of 14.75% as of 2026) and estate tax upon death (maximum rate of 16% as of 2026).