New York City’s Pied-à-Terre Tax

Transcript of Podcast Episode 397

Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode: New York City’s Pied-à-Terre Tax.

Affluent individuals owning real estate in New York City may now be subject to a “wealth” tax. If you own a second home in New York City, perhaps because you reside permanently in a different state but love the city in the spring or fall, or if you’re a real estate investor or reverse snowbird, then you may be in for a surprise. On July 1, 2026, a new law commonly referred to as the NYC Pied-à-Terre surtax became effective.[1] According to the Merriam-Webster dictionary, the phrase pied-à-terre is a French phrase that means “a temporary or second lodging.”[2] Final rules were published on July 14, 2026.[3]

The new law covers one to three family homes (“Class One” properties) and residential condominiums and co-ops (“Class Two” properties) which are not the primary residence of an individual. Individuals who own one of these types of properties are subject to an annual tax surcharge. If the property is owned by multiple individuals, or through a business entity such as a corporation or limited liability company, the person holding the majority interest is assessed the surcharge. If the property is owned by a trust, the responsible individual is the trust’s beneficial owner, provided the owner is the sole beneficiary of the trust.

An exemption applies if it can be shown that as of January 5 immediately before the relevant year at issue, the property was occupied as a primary residence for a period of at least one year by the individual or an immediate family member.

The final rules provide some clarity on the application of this new law, but questions remain, particularly if: there are multiple trust beneficiaries; it is difficult to determine who holds a majority interest; there is ownership of multiple properties; exemptions may apply; the resident may be temporarily confined to a medical or care facility; etc.

The NYC Department of Finance (“DOF”) determines if the surtax applies each year. There are two valuation methods and taxes that are used. Phase One lasts through June 30, 2028, and Phase Two begins on July 1, 2028. During Phase One, the market value of Class One properties must be valued at $5 million or above but for Class Two properties, the valuation minimum is $1 million. For Class One properties, the tax ranges from 0.8% to 1.3% of market value depending upon various valuation breakpoints. For Class Two properties, the tax ranges from 4.0% to 6.5% of market value again depending upon various valuation breakpoints. The large differences in valuation and tax are due to the way the DOF currently values condos and co-ops for real property tax purposes. In Phase Two, a single minimum $5 million valuation and only one rate schedule will apply to all properties after changes to the valuation process.

The DOF has commenced sending out notices, notifying homeowners that the DOF believes their property is subject to the surtax and the projected amount. The DOF is supposed to complete these notices no later than August 30, 2026. The appeals process generally starts 30 days after the notice is transmitted, NOT when it is received.

Since the law is new and there are many issues left unclear, the DOF has created a dedicated page on its website with frequently asked questions and other information at https://www.nyc.gov/site/finance/property/non-primary-residence-surcharge.page.

The new law is complicated, with questions remaining unanswered. Therefore, anybody who owns a second home in New York City that may have market valuations exceeding those mentioned should immediately consult with a tax professional or real estate attorney in New York to determine if they may be subject to the new wealth surtax. Owners must ensure that their contact information with the DOF is accurate since the appeals process is not dependent upon receipt of a notice. Note also that this wealth tax is applied against the entire market valuation of the residence and not just the portion exceeding the minimums.

[1] N.Y. Tax law Section 1350; N.Y.C. Admin. Code Section 11-3202.

[2] Merriam-Webster. “Definition: pied-à-terre.” Merriam-Webster.com. https://www.merriam-webster.com/dictionary/pied-%C3%A0-terre (accessed July 31, 2026)

[3] 19 RCNY Chapter 62

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