New York City’s Pied-à-Terre Tax: What Buyers, Owners and Investors Should Know

New York City now imposes an annual surcharge on certain high-value residential properties that do not serve as a primary residence. Commonly called the pied-à-terre tax, it can affect domestic and foreign owners of condominiums, cooperative apartments and one- to three-family homes.

The tax does not apply simply because an owner lives elsewhere or purchased the property as an investment. A qualifying property rented under a bona fide, arm’s-length lease may be treated as a primary residence when it is occupied as the tenant’s primary home. The property’s value, ownership structure and actual use must therefore be considered before determining whether the surcharge applies.

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

For the 2026–27 and 2027–28 property-tax years, the surcharge may apply to New York City condominiums and cooperative apartments valued by the Department of Finance at $1 million or more. It may also apply to one-, two- and three-family homes valued by the Department of Finance at more than $5 million.

Crossing the applicable value threshold does not automatically mean that the tax is owed. The property must also fail to qualify as a primary residence under the law. An owner who receives a notice from the Department of Finance may submit evidence showing that the property is exempt.

What Qualifies as a Primary Residence?

A property may be exempt when it serves as the primary residence of the owner, the owner’s immediate family member or a qualifying tenant or subtenant. Immediate family includes a spouse, child, sibling, parent, grandparent or grandchild.

Special rules apply when title is held through a limited liability company, corporation, partnership or trust. A residence occupied by individuals who collectively hold a majority interest in the owning entity may qualify, as may a residence occupied by the sole beneficiary or beneficiaries of a trust. The ownership documents and actual occupancy must support the claimed exemption.

An apartment purchased as an investment is not necessarily subject to the surcharge. A tenant’s occupancy can qualify the property as a primary residence if the tenant is a natural person, uses the apartment as a primary home and occupies it under a bona fide lease negotiated in an arm’s-length transaction for a term of at least one year.

A vacant investment property, an apartment reserved for occasional use or a short-term rental generally will not qualify through the tenant exemption. A lease to a business entity also does not establish primary residency because the qualifying tenant or subtenant must be a natural person.

How Is the Pied-à-Terre Surcharge Calculated?

For the 2026–27 and 2027–28 property-tax years, the surcharge is calculated using the property’s market value as determined by the New York City Department of Finance. If the applicable threshold is reached, the rate applies to the property’s entire market value—not merely the portion above the threshold.

For condominiums and cooperative apartments, the rates are:

• 4% for a market value of at least $1 million but less than $3 million
• 5.25% for a market value of at least $3 million but less than $5 million
• 6.5% for a market value of $5 million or more

For one-, two- and three-family homes, the rates are:

• 0.8% for a market value of at least $5 million but less than $15 million
• 1.05% for a market value of at least $15 million but less than $25 million
• 1.3% for a market value of $25 million or more

What Domestic, Out-of-State and Foreign Owners Should Know

The same basic rules apply whether an owner is a New York resident, lives in another state or maintains a primary residence outside the United States. Citizenship and immigration status are not the determining factors. The principal questions are the property’s value, how it is owned and whether it serves as someone’s primary residence.

An owner who retains the New York property as a second home, keeps it vacant or uses it only occasionally may be subject to the surcharge. Purchasing through an LLC, corporation, partnership or trust does not automatically avoid the tax. Conversely, a domestic or foreign-owned investment apartment may qualify for exemption when it is leased on an arm’s-length basis for at least one year and serves as the tenant’s primary residence.

Why the Tax Should Be Considered Before Purchasing

A purchaser who expects to use a high-value New York City property only occasionally should estimate the potential annual surcharge before signing a contract. The tax can materially change the carrying cost of a condominium, cooperative apartment or townhouse and should be considered together with ordinary property taxes, common charges or maintenance and financing costs.

Buyers planning to rent the property should also consider the intended lease term, the tenant’s use and the documentation needed to establish primary residency. These issues may influence the choice of property, ownership structure and whether the apartment will be maintained as a second home or operated as a long-term rental.

Planning Before Buying or Responding to a Notice

The pied-à-terre surcharge is significant, but its application depends on more than whether the owner lives elsewhere. Property value, actual occupancy, lease terms, ownership structure and the evidence available to establish primary residency must all be considered.

Domestic, out-of-state and international purchasers should evaluate the surcharge before signing a purchase contract or deciding how the property will be used. Owners who receive a Department of Finance notice should review it promptly and consult qualified legal and tax advisers regarding eligibility for an exemption and the documentation required to support it.