The New Pied-à-Terre Tax In New York City: What Domestic And Foreign Owners Need To Know

Background

On May 28, 2026, New York Governor Kathy Hochul signed legislation, as part of the New York State budget, imposing an annual surcharge on high-value residential property in the five boroughs of New York City (commonly known as the Pied-à-Terre Tax) that do not serve as the owner's primary residence. The Pied-à-Terre Tax is payable annually in addition to the annual real property taxes imposed by the New York City Department of Finance on residential properties unless an owner qualifies for an exemption. The Pied-à-Terre Tax became effective July 1, 2026, and is currently scheduled to remain in effect through June 30, 2031. The City of New York expects this new tax to generate approximately $500 million annually in additional revenue. 

The New York City Pied-à-Terre Tax

The Pied-à-Terre Tax is an additional annual tax imposed on certain New York City residential properties that are not used as a primary residence. The tax primarily affects second-home owners, non-New York residents, foreign investors, and owners of luxury residential properties held through trusts and entities.

The New York City Department of Finance ("DOF") will make an annual determination regarding whether a covered property qualifies as a primary residence. The Pied-à-Terre Tax generally does not apply if the property serves as the primary residence of the owner or qualifies for an exemption. 

The determination of primary residence status is fact sensitive and includes proof that an owner, immediate family member, or subtenant occupied the residential property for a majority of days during the immediately preceding calendar year. 

The amount of the Pied-à-Terre Tax depends on the property’s value as determined under the applicable DOF valuation methodology. 

During the initial phase of the law from July 1, 2026 until June 30, 2028 (Phase1), the surcharge will be calculated using the property’s valuation under the current DOF assessment methodology by applying the below tax rates:

For the period beginning July 1, 2028 and ending June 30, 2031 (Phase 2), the surcharge will be calculated based on the property’s value under the new DOF assessed-value system by applying the below tax rates:

The Pied-à-Terre Tax surcharge is payable annually in addition to regular New York City property taxes that are payable annually on residential property in New York City.

By way of example, assume that during Phase 1 a Florida resident owns a Manhattan condominium having a fair market value of approximately $6 million and a DOF property valuation of $2 million which property is not used as the owner's primary residence. Since the Manhattan condominium is not used as the owner's primary residence, it may be subject to the Pied-à-Terre Tax under the current regulations and the annual Pied-à-Terre Tax surcharge would be $80,000, calculated as follows: $2,000,000 × 4% = $80,000. 

By way of further example, assume that during Phase 2 a resident of Italy owns a Manhattan condominium with a fair market value of approximately $6 million that does not qualify as a primary residence and that under the Phase 2 valuation methodology, the DOF determines the property valuation to be $5.5 million. Because the property exceeds the $5 million threshold applicable to condominiums beginning on July 1, 2028, the annual Pied-à-Terre Tax would be $44,000 calculated as follows: $5,500,000 × 0.80% = $44,000.

Exemptions

A residential property may qualify for an exemption from the Pied-à-Terre Tax if the property serves as the primary residence of any of the following individuals: 

• The owner of the property;
• A tenant or subtenant;
• One or more individuals who collectively hold a majority interest in the limited liability company, corporation, or partnership that owns the property;
• An immediate family member (spouse, child, sibling, parent, grandparent, or grandchild) of the owner or majority-interest holder; or
• The sole beneficiary or beneficiaries of a trust. 

For purposes of the exemption, the DOF states that a determination of primary residence will be based on documentation that may include: (i) a state or federal income tax return indicating that the property or co-op unit was the permanent home address of the owner, immediate family member, tenant, or subtenant; (ii) evidence that the owner, immediate family member, tenant, or subtenant received other tax credits or exemptions as a primary resident of the property or co-op unit; (iii) proof that the owner, immediate family member, tenant, or subtenant occupied the property or co-op unit for a majority of days during the immediately preceding calendar year; and (iv) other documents previously submitted to the City indicating that the property or co-op unit is the primary residence of the owner, immediate family member, tenant, or subtenant. 

Notifications and Appeal Deadlines 

The DOF will make an annual determination regarding whether a covered property qualifies as a primary residence. Property owners generally have only 30 days from the transmission of the DOF's initial determination to contest the finding. 

On July 22, 2026, the DOF mailed notices to owners of New York City residential properties for which its records did not establish primary-residence status. The notices advised recipients that their properties may be subject to the Pied-à-Terre Tax unless they submit an exemption claim, together with supporting documentation, by Aug. 21, 2026 (or by Aug. 24, 2026, for cooperative units). On August 1, 2026, however, the DOF extended the deadline to September 18, 2026, for all property owners who had received a notice, regardless of the type of residential property involved.

Appeals must be filed electronically and supported by documentation demonstrating primary residence status. Owners may also seek review before the New York City Tax Commission regarding valuation issues and certain residence-status determinations. Filing deadlines generally correspond with the Tax Commission's annual filing calendar.

Pending Litigation

On August 10, 2026, a Staten Island judge placed a temporary hold on the rollout of over 900,000 properties and stopping enforcement of notices sent to about 17,000 homeowners who were identified as having secondary/non-primary residences subject to the Pied-à-Terre Tax. The plaintiffs in that action argued the City failed to properly determine residency status and instead required owners to prove they were not subject to the tax. While the plaintiffs contested the process, they did not challenge the tax’s legality. The City of New York filed an appeal triggering an automatic stay and on August 13, 2026, a New York appellate court temporarily stayed the August 10 order, which allowed the rollout to continue while the appeal is heard, at least until the August 31, 2026 hearing date. Accordingly, as of the date of this alert, enforcement of the Pied-à-Terre Tax, including the deadline of September 18, 2026, was temporarily allowed to resume.

Key Takeaways for Foreign Investors and Non-New York Residents

The new Pied-à-Terre Tax creates an additional layer of tax exposure for many New York City property owners, particularly those who maintain second homes or hold residential real estate through trusts or business entities. 

Property owners who receive a DOF notice should immediately determine whether the property qualifies for a primary-residence exemption and evaluate the documentation required to support the claim. Owners of properties held through trusts, partnerships, limited liability companies, and other entity structures may wish to pay particular attention to the unresolved interpretive issues and should consider seeking advice before submitting an exemption application. Investors holding property through LLCs, corporations, partnerships, and trusts should carefully review ownership structures, since the statute's application to complex ownership arrangements remains an area of developing guidance.

Given the significant additional annual tax liability, relatively short appeal deadlines, and evolving guidance from the DOF, affected owners should carefully evaluate their exposure now and consider whether planning opportunities exist to reduce or eliminate potential exposure to the Pied-à-Terre Tax surcharge.