The New York City Pied-à-Terre Tax was signed into law on May 28, 2026, as part of New York State’s 2027 fiscal year budget. This tax is an annual property tax surcharge that will apply to luxury homes that are used as a non-primary residence from July 1, 2026, to June 30, 2031. It was estimated in April that this surcharge would affect over 11,200 properties.
The purpose of the new surcharge is to generate revenue from owners of residential properties who are not New York City residents and do not pay city income tax. An additional motivation is to discourage absentee ownership, which is perceived to be “hollowing out” several upscale communities. The surcharge is expected to generate more than $500 million per year, which will go toward municipal services.
Who Will Pay the Pied-à-Terre Tax?
Absentee property owners of homes valued at or above certain thresholds will need to pay the surcharge an additional to the standard annual NYC real estate taxes. Properties are divided into two classes:
- Class one properties include one, two, and three-family homes with a five-year average market value at or above $5 million.
- Class two properties include multifamily dwellings held in condominium or cooperative form with an assessed value at or above $1 million.
This tax will affect many of the property owners who spend part of the year living in South Florida and part of the year living in luxury second homes in New York City. If this applies to you, get advice from a tax planning professional before the surcharge takes effect.
NYC PAT Tax Surcharge Rates
Rates for the annual surcharge apply in tiers and will be implemented in two phases.
Phase One
Phase one applies from 1 July 2026 to 30 June 2028.
| Class One Properties | Rate |
| Properties with a market value from $5 million up to $15 million | 0.8% |
| Properties with a market value higher than $15 million up to $25 million | 1.05% |
| Properties with a market value higher than $25 million | 1.3% |
| Class Two Properties | |
| Properties with an assessed value from $1 million up to $3 million | 4.0% |
| Properties with an assessed value higher than $3 million up to $5 million | 5.25% |
| Properties with an assessed value higher than $5 million | 6.5% |
Readers will notice that the thresholds are lower and the rates higher for class two properties in phase one. This is because the Department of Finance currently values them differently from class one properties. Class one properties are assessed using comparable sales data. In contrast, class two properties are valued using comparable rental data. This results in a lower valuation.
Phase Two
Phase two runs from 1 July 2028 to 30 June 2031. In this phase, properties in both classes will be valued using comparable sales data. The higher valuations and lower rates will apply to both property classes in this phase.
The Primary Residence Exclusion
The application of the New York City Pied-à-Terre Tax hinges on the definitions of a “primary residence” and a “nonprimary residence.” Properties that meet the “primary residence” criteria are excluded from the surcharge.
A property is considered a primary residence if:
- The “covered owner” occupies the property for a majority of days in the fiscal year, and they state a New York City address on their tax return.
- An immediate family member of the “covered owner” (spouse, sibling, child, parent, grandchild, or grandparent) uses it as their primary residence.
- It is rented to a tenant who uses it as their primary residence and has a lease of at least 12 months.
A “covered owner” includes an individual owner of the property, a beneficiary of a trust that owns the property, and majority shareholders, partners, or members of a corporation, partnership, or limited liability company holding the property.
Tip: If you decide to rent out your New York City property, check out our guide to tax planning for real estate investors.
Plan Strategically and Avoid Surprises
The Pied-à-Terre Tax will potentially affect several thousand NYC homeowners, including many who are part-time residents of South Florida. While lawmakers consider that these individuals have the means to pay the surcharge, we understand the budget shock that this will bring for many.
The good news is that the primary residence exception gives property owners the opportunity to rent out their homes or have an immediate family member move in before the new tax takes effect. Talk to a trusted tax professional to understand your options and make the best decisions for your personal situation.
