On May 28, 2026, Governor Hochul, as part of New York’s fiscal year 2026/2027 budget, enacted a new annual surcharge on certain high-value residential New York City properties that are not used as the primary residence of an owner, an owner’s family member, or a tenant; commonly referred to as the “pied-à-terre tax.”
This surcharge is effective for fiscal years beginning on or after July 1, 2026, and is imposed in addition to existing property taxes. The surcharge applies to non-primary-use residences above specified market value thresholds. This article provides answers to common questions owners of high-value New York City residential property will have about the key provisions of the surcharge for their CPAs.
Which Properties Will Be Affected?
The surcharge applies to the following residential properties (covered properties) for the period from July 1, 2026, to June 30, 2028 (phase one)—
- one to three family residences with a market value of $5 million or more; and
- residential condominiums and cooperative (co-op) units with a market value of $1 million or more.
Beginning July 1, 2028 (phase two), the New York City Department of Finance (DOF) will update market values for condominiums and co-ops and the surcharge will apply to all covered properties with a market value of $5 million or more. These rates are listed in the Exhibit.
EXHIBIT
Property Surcharge Rates
How are Market Values Determined?
Market values are determined annually by the DOF, and for most properties the DOF’s valuation provided on the annual Notice of Property Value will be utilized for surcharge purposes.
It is important to note that because co-op units are shares in a corporation rather than directly owned real property, currently there is no assigned individual unit value for co-ops. Instead, the new tax law provides that for Phase 1 the market value for each co-op unit will be imputed based on the ratio of shares allocated to a particular unit to the total shares issued by the co-op corporation multiplied by the market value of the building’s overall valuation.
Are Exemptions Available?
An owner whose property meets the applicable market value threshold will be exempt from the surcharge if the property is the primary residence of—
- one or more of the property owners;
- an immediate family member (spouse, child, sibling, parent, grandparent, or grandchild) of one or more of the owners; or
- one or more lessees or sub-lessees under an arm’s length lease of at least one year.
The exemption is reviewed annually in order to determine whether the surcharge will apply. In addition, a covered property will be exempt as a primary residence of the owner (and thus exempt from the surcharge) if the owner—
- indicated on their most recent state or federal income tax return that the property is the owner’s permanent home address or received a School Tax Relief (STAR) Credit; or
- received a property tax exemption targeted to owner-occupied properties (including STAR and certain exemptions for veterans, clergy, and senior citizens and persons with disabilities meeting income requirements).
Beginning July 1, 2027, the DOF may also base its determination on other factors, including whether the owner—
- occupied the property for a majority of days during the immediately prior calendar year; or
- indicated that the property is the owner’s permanent residence in other documents previously submitted to the city.
How Is Ownership Determined?
For the purpose of determining primary residence for properties owned by a partnership, corporation, or limited liability company (LLC), the owner can be a partner, shareholder, or member holding a majority interest in the partnership, corporation, or LLC. For the purpose of determining primary residence for a property held in trust, the owner is a beneficial owner of the trust, provided such owner is the sole beneficiary of the trust.
Can Determinations be Appealed?
The DOF has officially sent formal notices to approximately 17,000 property owners outlining the amount of the non-primary residence surcharge and explaining how to apply for an exemption, including guidance on what documents to submit. The due date for responses to these notices has been extended to Sept. 18, 2026, for the 2026/2027 property tax year.
If the DOF denies an owner’s claim for exemption, an application can be filed with the New York City Tax Commission to appeal the DOF’s determination.
Owners may also file a challenge with the Tax Commission if they believe the DOF has incorrectly valued their property. As part of the challenge, owners can also request a determination on whether the property is exempt as a primary residence; however, that request must be done in conjunction with the challenge to the property’s value and precludes owners from also applying for exemption from the DOF.
Litigation Challenge
After initial notices were sent to property owners, some New York City residents filed a lawsuit claiming the city improperly identified properties that are potentially subject to the surcharge. On Aug. 10, 2026, a New York State judge ruled requiring removal of the city’s 960,000 property tax roll that is publicly posted and pauses enforcement related to the approximate 17,000 notices that were sent. The lawsuit does not challenge the tax’s legality; instead plaintiffs contend that the city inappropriately shifted the burden of proving eligibility for exemptions to city residents. The next hearing is scheduled for Aug. 31, 2026. New York City maintains that additional information is needed to determine primary resident status, and the city appealed the judge’s ruling, which automatically stays the judge’s order until it is heard by a higher court. Visit the DOF’s web site for detailed information and guidance about the new surcharge.
