Summary: New York City’s new pied-à-terre tax, effective July 1, 2026, imposes a surcharge on certain high-value residential properties that are not used as the owner’s primary residence. Although the tax is currently in effect, ongoing litigation and evolving guidance continue to create uncertainty for affected property owners. This article outlines who may be subject to the surcharge, available exemptions, key filing deadlines, recent legal developments, and practical steps property owners should consider to evaluate their exposure and compliance obligations.

Disclaimer: This summary is general in nature and reflects public guidance, which continues to evolve. It is not a substitute for advice on a specific situation. Please contact a KSM advisor with questions or to review specific exposure.

New York’s 2026 legislative session brought sweeping changes to the state’s tax landscape, with one of the most closely watched developments being New York City’s new pied-à-terre tax. Effective July 1, 2026, the surcharge targets certain high-value residential properties that are not used as a primary residence, expanding the tax burden for many owners of second homes, investment properties, and luxury condominiums across all five boroughs.

Although the law is already in effect, ongoing legal challenges and evolving administrative guidance have created uncertainty for affected property owners, making it essential to understand who is subject to the surcharge, available exemptions, and the steps that should be taken now.

Timeline and Recent Developments

• July 1, 2026: New York City imposed an annual surcharge on residential properties that are not the owner’s primary residence. This applied citywide in all five boroughs. It applied to 1-2-3 family homes valued at $5 million or more and to condominium or cooperative units valued at $1 million or more. A genuine primary residence remains exempt from the surcharge regardless of value. Normal property tax would still apply.
• Aug. 10, 2026: The New York Supreme Court issued a temporary restraining order prohibiting New York City from taking further action based on the supplemental roll or mailed notices in administering or assessing the surcharge without first making the individualized determination and providing the notice required by statute. The order also temporarily prohibits the city from enforcing the Sept. 18, 2026, exemption application deadline against homeowners who received a mailed notice, pending further proceedings. The hearing is scheduled for Aug. 31, 2026. The city is planning on appealing the decision.
• Aug. 13, 2026: An appellate court in Brooklyn ruled the pied-à-terre tax can proceed for now after the appeals court put a temporary hold on the previous order blocking the plan. The hearing is still scheduled for Aug. 31, 2026.

Who Is Affected by the NYC Pied-à-Terre Tax

• NYC residential property owners in any borough that own property that isn’t a day-to-day home
• The property’s value is at or above the thresholds above
• A Department of Finance (DOF) notice was received this summer

Who Is Exempt From the NYC Pied-à-Terre Tax

Exemption from the tax is likely if the property serves as a primary home or is the primary home of:

• An immediate family member
• A qualifying tenant under a 1-year+ lease, where the tenant is using the property as their primary residence
• A majority owner of the entity that holds title, or the sole present beneficiaries of a trust

Surcharge Rates (Phase One, FY2026-27 – FY2027-28)

Property Class	DOF Market Value*	Rate**
Class 1 (1-2-3 family)	$5M – $15M	0.8%
	Over $15M – $25M	1.05%
	Over $25M	1.3%
Class 2 (condo/co-op)	$1M – $3M	4.0%
	Over $3M – $5M	5.25%
	Over $5M	6.5%

*DOF market value may not equal true arms-length market value. This is the value the DOF has applied to the property using current valuation techniques.
**Rate applies to the entire market value. Each threshold is a cliff, not a step.

Key Dates

Date
Sept. 18, 2026	Exemption filing deadline
Jan. 1, 2027	Surcharge first appears on the regular tax bill
June 30, 2031	Surcharge sunsets absent renewal

Recommended Next Steps

• If a DOF notice has been received, don’t wait to act. Begin gathering documentation to support an exemption (tax return, ID, lease, or entity/trust records, as applicable).
• If the property is held in an LLC, partnership, or trust, talk to your tax advisor before certifying. Recent DOF rules changed how these structures qualify.
• If a DOF notice was not received but a property is believed to be affected, reach out to your tax advisor now rather than waiting for one to arrive.

While the future of the pied-à-terre tax remains uncertain as litigation continues, property owners should not assume the legal challenges will eliminate their filing obligations or potential exposure. With significant surcharge rates, strict exemption requirements, and special rules for properties held through entities or trusts, early planning is critical.

How KSM Can Help

If you own a high-value residential property in New York City and are unsure how these rules apply to your situation, KSM can help evaluate exposure, navigate the exemption process, and develop strategies to manage the tax’s impact. For assistance, reach out to your KSM advisor or fill out the form below.

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