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New York’s fiscal year 2026-2027 budget (Opens a new window) enacts a new annual surcharge on certain high-value residential New York City properties that are not used as a primary residence of the owner, commonly referred to as the "pied-à-terre tax."
The surcharge is imposed in addition to existing property taxes and is designed to target non-primary-use residences above specified market value thresholds. It takes effect for fiscal years beginning on or after July 1, 2026.
If you own a high-value residential property in New York City that is not your primary residence, this article explains which properties are affected, how the surcharge is calculated, and how the New York City Department of Finance (DOF) will administer it.
Which properties are affected?
Defined in the legislation as “covered” properties, the surcharge applies to the following residential properties for the period from July 1, 2026, to June 30, 2028 (phase one):
- One- to three-family residences with a market value of at least $5 million
- Residential condominiums and cooperative (co-op) units with a market value of at least $1 million
Beginning July 1, 2028 (phase two), the lower $1 million threshold for condominiums and co-ops will be eliminated. From that point forward, the surcharge will apply to one- to three-family residences, condominiums, and co-op units with a market value of at least $5 million.
How are market values determined for the surcharge?
Market values are determined annually by DOF. For most property types, DOF's valuation provides the applicable market value for surcharge purposes.
Special rule for co-op units: Because co-op units are shares in a corporation rather than directly owned real property, DOF does not assign individual unit valuations in the same way it does for condominiums. Instead, the law requires the market value of each co-op unit to be imputed from the building's overall valuation. Specifically, the total market value of the co-op building is multiplied by the ratio of shares allocated to the particular unit to the total shares issued by the co-op corporation.
Are there any exemptions available?
An owner whose property meets the applicable market value threshold will not be subject to the surcharge if the property qualifies as the primary residence of:
- One or more of the property owners;
- An immediate family member of one or more of the owners; or
- A tenant occupying the property under a bona fide lease of at least one year.
The DOF will make annual determinations regarding primary residence. Among the factors DOF will consider is whether the property was occupied in aggregate for a majority of days during a calendar year by an owner of the property.
Owners will receive formal notice of DOF’s determination, by Aug. 30, 2026, and will have the opportunity to challenge it by submitting supporting documentation, such as tax returns or lease agreements.
Properties owned by a partnership, corporation, or limited liability company (LLC)
For the purpose of determining primary residence for such properties the owner(s) is(are) the partner(s), shareholder(s), or member(s) holding a majority interest in the partnership, corporation or LLC.
Properties held in trust
For the purpose of determining primary residence for a property held in trust, the owner(s) is (are) a beneficial owner(s) of the trust, provided they are the sole beneficiary(ies) of the trust.
Phase one surcharge rates: July 1, 2026–June 30, 2028
| One- to three family residences | |
|---|---|
| Market value range | Surcharge rate |
| $5M–$15M | 0.80% |
| $15M–$25M | 1.05% |
| Over $25M | 1.30% |
| Condominiums and co-ops | |
|---|---|
| Market value range | Surcharge rate |
| $1M–$3M | 4% |
| $3M–$5M | 5.25% |
| Over $5M | 6.50% |
Phase two surcharge rates: beginning July 1, 2028
| All properties | |
|---|---|
| Market value range | Surcharge rate |
| $5M–$15M | 0.80% |
| $15M–$25M | 1.05% |
| Over $25M | 1.30% |
What does CohnReznick think?
If you own or have an interest in New York City residential property, we recommend taking the following steps in advance of the July 1, 2026, effective date:
- Confirm the DOF market value of your property and assess whether the applicable threshold is met.
- Evaluate whether the property qualifies as a primary residence and gather supporting documentation.
- If the property is held through a partnership, corporation, LLC, or trust, analyze how ownership interest and beneficial ownership rules interact with the primary residence exemption.
We will continue to monitor guidance pertaining to the surcharge and primary residence determination procedures. Please contact your advisor if you have questions about how this surcharge may affect your specific situation.
Joseph Carzo
Director, State and Local Tax (SALT) ServicesRelated services
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Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice specific to, among other things, your individual facts, circumstances and jurisdiction. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.