- New York State’s FY 2027 budget includes the long-anticipated New York City pied-à-terre tax, targeting high-value residential properties that are not used as primary residences.
- While the concept is straightforward, the enacted rules introduce multi-phase thresholds, differing valuation methodologies, and evolving rate structures that may create unexpected exposure for property owners.
- Early analysis suggests the surcharge could apply more broadly than many taxpayers expect, particularly in the case of cooperative and condominium units.
Background
After much discussion and public debate, New York Governor Kathy Hochul signed the fiscal year 2027 state budget on May 28, 2026, which implements the so-called “pied-à-terre ” surcharge on New York City homes not considered primary residences that exceed a certain value.
The legislation reflects ongoing policy efforts to increase tax revenue from under-utilized high-value properties and is expected to have significant implications for both domestic and nonresident owners.
Imposition of Surcharge and Critical Definitions
The new pied-à-terre tax (technically labelled as a surcharge under the legislation) is imposed on certain high-value New York City residential properties that are not used as a primary residence. The surcharge is codified in Article 30-C of the New York Tax Law (and in a new chapter of New York City’s Administrative Code). The surcharge is imposed starting on July 1, 2026, and is scheduled to sunset on June 30, 2031. The first year’s surcharge is due on January 1, 2027.
The surcharge is imposed on “covered properties” that are not considered primary residences, which include:
- Class One properties – one- to three-family residential homes; and
- Class Two properties – condominium and cooperative units.
These classifications are drawn from definitions found in the New York Real Property Tax Law. During the first phase, which runs through June 30, 2028, class one properties valued in excess of $5,000,000 are subject to the surcharge; class two properties have a lower threshold of $1,000,000. The second phase, which runs through June 30, 2031, applies a $5,000,000 valuation threshold across the board to both classes of property.
During the first phase, the market values for 1-3 family residential homes and condominiums are based upon the current assessed market value by the Department of Finance. For cooperatives, value is calculated by multiplying the owner’s share percentage in the cooperative by the total value of the building. Rates are graduated from 0.8% to 1.3% for class one properties, and from 4.0% to 6.5% for class two properties.
In phase two, from July 1, 2028, through expiration on June 30, 2031, class one properties are still valued based upon assessed market value; for condominiums and cooperatives, the legislation dictates that the method of valuation should consider comparable sales. The rates are standardized across all classes of property in phase two, and they are graduated from 0.85% to 1.3% depending on value.
Forvis Mazars Insight: The higher rates and lower thresholds for condominiums and cooperatives in phase one reflect longstanding valuation disparities resulting in those units historically being assessed at lower than fair market value. As a result, certain property types may face a significantly higher effective tax burden earlier than similarly valued single-family homes.
Primary Residences
It will be of critical importance to determine whether the covered property in question is considered a primary residence and therefore not subject to the surcharge. The legislation defines “primary residence” as any covered property (including a cooperative dwelling unit within a cooperative building) which is being used, as of the “taxable status date” (January 5th immediately before the fiscal year for which the surcharge is imposed), as a primary residence by a covered owner or an immediate family member of a covered owner. Arm’s length leases to certain qualified lessees may also qualify the covered property as a primary residence. The Department of Finance is required by the legislation to make such determination by August 30, 2026 for the initial fiscal year, and will consider various factors in making this determination, including but not limited to, whether the residence was occupied by a covered owner (or an immediate family member) for a majority of days during the calendar year.
While the definition appears straightforward, the determination of primary residence status is expected to involve fact-intensive analysis, including occupancy patterns, lease structures, and documentation provided to the Department of Finance.
Importantly, this determination may intersect with broader New York State and City residency considerations, potentially creating exposure beyond the pied-à-terre surcharge itself.
Forvis Mazars Insight: Taxpayers should carefully evaluate time spent in New York City not only for purposes of the pied-à-terre surcharge, but also considering potential New York State and City income tax residency implications.
Administration
The law calls for the Department of Finance to add the amount of the surcharge to the covered owner’s property tax bill. For cooperatives, the Department of Finance will collect the amount attributable to the non-primary residence units meeting the phase one or phase two thresholds, as applicable, leaving the cooperative to collect the portion of the surcharge due from each of the shareholders whose units meet the thresholds. Penalties may apply if the Department of Finance determines that any documentation or certification was submitted inaccurately, negligently or in bad faith.
Key Considerations for Taxpayers
The new surcharge raises several planning and compliance considerations, including:
- Whether a property qualifies as a primary residence under the statute
- The potential impact of ownership structure (e.g., individual vs. entity ownership)
- Differences in valuation methodologies across property types
- Interaction with New York State and City residency rules; and
- Timing considerations as the law phases in
Given the complexity of these rules, early evaluation may be important to identify opportunities to mitigate exposure or align structures with intended use.
How Forvis Mazars Can Help
We can assist in evaluating whether the surcharge applies to your property, assessing primary residence status, and identifying potential planning considerations considering your broader tax profile. Please contact your Forvis Mazars advisor to discuss how these new rules may affect you.