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What the pied-à-terre surcharge means for owners
A recent New York City pied-à-terre surcharge is drawing attention from owners of high-value residential properties, particularly those who maintain a home in the City and it is not their primary residence. While the rules will not affect every homeowner and may still change due to some litigation already in process, the surcharge could create meaningful additional costs for some property owners and may warrant a closer look at ownership, usage, and overall tax planning.
Below, we outline the current rules for how the new surcharge works, which properties it may apply to, and a few practical points for owners to keep in mind.
As part of the 2026–2027 New York State Budget, New York enacted new rules authorizing a New York City surcharge on certain residential properties that do not serve as the owner’s primary residence. Effective July 1, 2026, the surcharge applies annually and is calculated by multiplying the assessed value of the residential property by the applicable surcharge rate (described below). The surcharge is imposed in addition to regular property taxes.
In practical terms, this means that some owners of second homes and other non-primary residences in New York City may now face an additional annual carrying cost.
For purposes of the surcharge, residential property includes:
The rules are broader than they may first appear. The surcharge can apply not only when property is owned directly by an individual, but also when it is held through certain look-through ownership structures, including:
As a result, owners who hold New York City residential property through planning or investment structures may want to review those arrangements carefully.
Are there exemptions?
Yes. The surcharge generally does not apply if the property serves as the owner’s primary residence. There are additional exemptions for certain other situations, including:
To qualify for an exemption, homeowners must apply for the exemption and provide supporting documentation by October 6, 2026, via the City’s Department of Finance website. The required documentation will depend on the exemption being claimed, but may include:
The surcharge is being implemented in two phases.
Phase One: July 1, 2026 through June 30, 2028
During the initial phase, one-, two-, and three-family homes are subject to different valuation thresholds and surcharge rates than co-ops and condominiums.
The reason for this distinction is tied to valuation. According to the City, co-ops and condominiums have historically been assessed under a methodology that often results in values that are significantly lower than comparable sale prices. The different thresholds and rates in Phase One are intended to account for that difference until a new valuation approach is adopted.
Phase One surcharge rates:
| Class One: One-, two-, three-family homes | |
| Value of Property | Annual surcharge rate |
| $5,000,000 – $15,000,000 | 0.80% |
| Greater than $15,000,000 – $25,000,000 | 1.05% |
| Greater than $25,000,000 | 1.30% |
Example: A one-family home subject to the surcharge with an assessed value of $10,000,000 would owe an annual surcharge of $80,000 ($10,000,000 x 0.8%).
| Class Two: Co-ops and condominiums | |
| Value of Property | Annual surcharge rate |
| $1,000,000 – $3,000,000 | 4.00% |
| Greater than $3,000,000 – $5,000,000 | 5.25% |
| Greater than $5,000,000 | 6.50% |
Example: A co-op subject to the surcharge with an assessed value of $1,500,000 would owe an annual surcharge of $60,000 ($1,500,000 x 4%). It is anticipated that the co-op will be reassessed prior to June 30, 2028, and will be subject to different thresholds and rates beginning July 1, 2028 as described below.
Phase Two: July 1, 2028, and beyond
Beginning July 1, 2028, the same valuation thresholds and surcharge rates are expected to apply across all covered property types. Before then, the New York City Department of Finance anticipates adopting a new methodology for valuing co-ops and condominiums. If that occurs as expected, there will no longer be a need for a separate surcharge framework for those properties.
Phase Two surcharge rates:
| All properties after July 1, 2028 | |
| Value of Property | Annual surcharge rate |
| $5,000,000 – $15,000,000 | 0.80% |
| Greater than $15,000,000 – $25,000,000 | 1.05% |
| Greater than $25,000,000 | 1.30% |
Example: A condominium subject to the surcharge with an assessed value of $6,000,000 would owe an annual surcharge of $48,000 ($6,000,000 x 0.8%).
Yes. Property owners may appeal the valuation used for surcharge purposes with the New York City Tax Commission. Owners should be aware that if they are looking to appeal the valuation and apply for an exemption, both will need to be filed with the New York City Tax Commission and may be subject to different deadlines. If you want to appeal the valuation, you may want to consult with real estate counsel.
For owners of high-value New York City residences, the new pied-à-terre surcharge is more than just another tax development. It may affect annual holding costs, ownership structuring, leasing decisions, and broader planning considerations.
The City is currently sending notices to affected property owners by mail. For properties that are subject to the surcharge, billing is expected to begin on January 1, 2027. If you own or are considering acquiring a non-primary residence in the City, now may be a good time to review how the property is held, whether an exemption may be available, and what documentation should be assembled in anticipation of City inquiries.
For more information, reach out to your CIBC advisor.
