New York City’s Pied- à-Terre (Second Home Surcharge) is in Effect

A new surcharge on higher-value second homes, condos, and co-ops in New York City started July 1, 2026.

New York’s recently enacted state budget includes a surcharge, commonly called the pied-à-terre tax, on higher-value residential properties in New York City not used as a primary residence. The surcharge applies to fiscal years beginning July 1, 2026, and is scheduled to sunset June 30, 2031. This new tax potentially applies to anyone owning a second home, condo, or co-op in the city.

How does the surcharge work?

The surcharge is being phased in. During Phase One, condo and co-op valuation relies on existing New York City Department of Finance (DOF) assessments and higher rates apply to these properties.

Beginning July 1, 2028, Phase Two adopts a market-based valuation approach for condos and co-ops and applies a uniform rate structure to all covered property types.

Phase One -

• July 1, 2026, through June 30, 2028
• Applies to one- to three-family homes valued at $5 million or greater:
  • $5 million to less than $15 million: 0.8%
  • $15 million to less than $25 million: 1.05%
  • $25 million or greater: 1.3%
• Applies to condos and co-ops valued at $1 million or greater:
  • $1 million to less than $3 million: 4%
  • $3 million to less than $5 million: 5.25%
  • $5 million or greater: 6.5%
• For condos and co-ops, value is based on the DOF’s assessed value, which is generally well below market value
• The surcharge creates a cliff effect. A property valued by the DOF at just above the threshold pays the higher rate on its full value

Phase Two -

• July 1, 2028, through June 30, 2031
• The rates that apply to one- to three-family homes now apply to condos and co-ops valued at $5 million or greater:
  • $5 million to less than $15 million: 0.8%
  • $15 million to less than $25 million: 1.05%
  • $25 million or greater: 1.3%
• Valuation is determined using a market-based methodology that takes comparable sales into account
• Cliff effect outlined in Phase One continues to apply

The surcharge does not apply to vacant land, commercial property, buildings without a certificate of occupancy, unsold units held by a developer, buildings with more than three condo units under common ownership, or residential rental buildings.

The Primary Residence Exception

The surcharge also does not apply to a primary residence. The DOF decides each year, based upon available information, whether the property qualifies as a primary residence. One factor is whether the property was occupied for the majority of the calendar year. This is measured on January 5 of the preceding fiscal year (for 2026-27, as of January 5, 2026).

The primary residence exception applies if:

1. The property is used as the primary residence of the owner or an immediate family member, meaning a spouse, child, sibling, parent, grandparent, or grandchild.
2. The property is subject to an arm’s-length lease of at least one year to a tenant who uses it as a primary residence.

For properties held through a trust, LLC, partnership, or corporation, the analysis looks through the entity to the individual owners. With family limited partnerships and similar family-owned structures, the DOF is likely to focus on who holds the majority interest and how the property is used.

What to Expect

The DOF released a supplemental market value roll, listing each property that might be subject to the surcharge and its value. In late July, the DOF began mailing notices to owners whose property might be subject to the surcharge.

Receiving one of these letters does not mean an owner owes the surcharge; it means the DOF’s records did not confirm the property is a primary residence. The property tax roll listed nearly one million addresses across the five NYC boroughs that may be subject to the new tax. However, the city clarified that only a fraction of the residences on that list would fall under the tax category.

A separate, formal surcharge notice will be sent no later than August 30, 2026. This notice will state the property’s status as a second home, the projected surcharge amount, the appeal deadline, and instructions for filing.

If an owner disagrees with the DOF’s conclusion , they can appeal by submitting an exemption application. Owners must submit the exemption application by September 18, 2026.

An appeal may be made to either the DOF or the Tax Commission, but not both. Owners who received an initial notice should not wait to receive the later formal notice before gathering documentation to appeal. Penalties of up to 50% of the surcharge may apply where a certification is inaccurate or materially misleading, so it is important to ensure the accuracy of all filings. There may be additional appeal opportunities if the exemption application is denied or the deadline is missed.

Payment of the surcharge is due January 1, 2027. It is possible that taxpayers contesting the DOF’s conclusion may not have an answer before payment is due, in which case they will have to pay the surcharge and wait for a final DOF decision.

How Eide Bailly Can Help

If your property appears on the supplemental market value roll or you receive a notice, we can help. We can explore whether the primary residence exception applies and help formulate a defense when appealing to the DOF. Reach out to our state and local tax professionals.