New York City Pied-à-Terre Tax Enacted in State Budget

After weeks of negotiations and several budget extensions, New York State finally enacted its fiscal year 2026-2027 budget. The budget addresses several tax provisions, including those in the One Big Beautiful Bill Act. But in terms of media attention, the biggest proposal to make it into the final bill is the property tax surcharge on secondary homes in New York City, commonly referred to as a pied-à-terre tax.

What Is the Pied-à-Terre Tax?

For fiscal years commencing July 1, 2026, through June 30, 2031, New York City will impose an annual surcharge on residential property that does not serve as a primary residence (commonly referred to as the pied-à-terre tax). The surcharge is added to the owner’s real property tax bill.

What Properties Are Subject to the Pied-à-Terre Tax?

The surcharge applies only to class one residential property (i.e., one-to-three family homes) and class two residential condominium and cooperative units. Property that falls outside of these categories, including rental apartment buildings, commercial property, hotels, and vacant land, is not subject to the surcharge. The tax is calculated based on the market value of the property, as determined by the Department of Finance, which should be shown on the property tax assessment.

The tax will be implemented in two phases, imposed as follows:

Phase One: July 1, 2026, through June 30, 2028

Phase Two: July 1, 2028, through June 30, 2031

Who Is Exempt from the Pied-à-Terre Tax?

Properties that are considered primary residences are not subject to the tax. A property qualifies as a “primary residence” under the following circumstances:

1. the owner(s) or an immediate family member (defined as a spouse, child, sibling, parent, grandparent, or grandchild) occupies the property as their primary residence; or
2. the property is leased (or sub-leased) to a natural person under an arms-length lease with a term of not less than one year.

The legislation contemplates different ownership structures and how to determine who the ultimate owner(s) may be for tax purposes. For instance, if a property is owned by a partnership, a partner who holds a majority ownership interest will be considered the owner. Practically, this could result in situations where no natural person is considered an owner able to claim the property as a primary residence.

How Will the Pied-à-Terre Tax Be Implemented?

The Department of Finance will determine on an annual basis whether a covered property is a primary residence. The Department’s determination constitutes a final administrative determination. Owners may seek administrative and judicial review of the surcharge pursuant to the review provisions of the New York City Administrative Code.

By August 30, 2026, the Department is required to provide owners with a notice of whether a property is subject to the surcharge, along with an opportunity to submit proof that the property is a “primary residence.” The Department will consider documents such as tax returns and lease agreements in addition to whether the owner or an immediate family member occupied the property for a majority of days during a calendar year.

The Department has six years to audit any certification or documentation submitted, and the surcharge remains valid even if the Department fails to satisfy its notice obligation.

What Are the Practical Implications of the Tax?

An individual who owns a high-value residential property in New York City may consider using property as a "primary residence" to avoid the surcharge. However, doing so will require the taxpayer to be subject to New York State and New York City personal income tax, which otherwise applies only to City residents.

Even without a primary residence designation, an individual may qualify as a New York City statutory resident subject to the City’s personal income tax by spending more than 183 days in the City. Accordingly, someone who is not considered to be domiciled in New York City but who spends significant time there faces potential exposure to both the surcharge and the City’s personal income tax.

Are you concerned that you may be subject to the new pied-à-terre tax? Contact our team below to learn more about how we can help you navigate this and other tax law changes.