July 21, 2026

New York’s fiscal year 2027 budget was signed into law on May 28, 2026. As a part of an effort to help close New York City’s budget gap, the legislation imposes an annual property tax surcharge —otherwise known as the Pied-à-Terre Surcharge (“Surcharge”) —on certain high value non-primary residences in New York City (NYC). The Surcharge is effective beginning July 1, 2026.

What is the Pied-à-Terre Surcharge?

A pied-à-terre is a temporary or second residence. The newly enacted Surcharge applies to certain non-primary residential properties in New York City with a market value of $1 million or $5 million or more, depending on the property classification. The Surcharge is intended to target nonresidents who own apartments, cooperative units, condominiums or townhouses that they only occupy for a portion of the year.

Which properties and what individuals qualify for the Surcharge?

The Pied-à-Terre Surcharge will be implemented in two phases.

Transition Phase 1 (July 1, 2026 – July 1, 2028)

Class 1 Properties:

• One-, two-, and three-family homes become subject to the Surcharge when their five-year average market value reaches $5 million or more, as determined using comparable property sales

Class 2 Properties:

• Residential condominium and cooperative units become subject to the Surcharge when:
  • the average market value reaches $1 million or more, and
  • the NYC Department of Finance assessed value is $300,000 or more
• Units appraised below $5 million in the prior three years are exempt

Transition Phase 2 (After July 1, 2028)

Class 1 and Class 2 Properties:

• The market value threshold for all covered residential properties increases to $5 million

Exemptions

The following properties are exempt from the Surcharge:

• The primary residence of at least one owner
• The primary residence of a parent or child of at least one owner
• Properties or dwelling units that are rented to a NYC primary resident

When determining whether a residence qualifies as a primary residence, the NYC Department of Finance (DOF) generally considers factors including:

• The 184-day statutory residency threshold (maintaining a permanent residence in New York and spending at least 184 days in the state)
• Additional evidence, such as voter registration, driver’s license address, federal income tax filing address, etc.

Surcharge Rates

The Surcharge is imposed using graduated (marginal) tax rates.

Phase 1 (July 1, 2026 – July 1, 2028)

Class 1 Properties:

• 0.8% on property valued from $5 million - $15 million
• 1.05% on property valued from $15 million - $25 million
• 1.3% on property valued above $25 million

Class 2 Properties:

• 4.0% on property valued from $1 million - $3 million
• 5.25% on property valued from $3 million - $5 million
• 6.5% on property valued above $5 million

Phase 2 (After July 1, 2028)

Class 1 and 2 Properties:

• 0.8% on property valued from $5 million - $15 million
• 1.05% on property valued from $15 million - $25 million
• 1.3% on property valued above $25 million

As with other graduated tax structures, each rate applies only to the portion of the property’s value within the applicable bracket.

Additional Information

The enabling statute authorizes the New York City Department of Finance to issue administrative rules for implementing the Surcharge, including compliance and reporting requirements.

Unless extended or modified for future legislation, the Surcharge is set to remain in effect until June 30, 2031.

Next Steps for Taxpayers

The New York City Department of Finance is expected to issue notices of intent to levy the Pied-à-Terre Surcharge for the 2026 tax year by August 30, 2026 to the applicable owners of NYC residential properties.

Property owners should consider whether the Surcharge may apply to any non-primary residences they own in New York City.  If an owner receives a notice asserting that a property is subject to the Surcharge, but believes it qualifies for an exemption or otherwise should not be subject to the tax, the owner should timely respond to the DOF with documentation supporting that position.  

Have Questions or Need Guidance?

If you have questions regarding the Pied-à-Terre Surcharge, its potential impact on your tax obligations, or other provisions included in New York’s fiscal year 2027 budget, please contact your HCVT State and Local Tax partner. Our team can help you evaluate how these changes may affect your situation and identify appropriate planning opportunities.