Legislation · Tax

The NYC Pied-à-Terre Tax Is Now Law. Here Is What It Actually Does to Condos and Co-ops.

· William Luxe New York ·

Last updated: May 30, 2026. This article explains the pied-à-terre surcharge enacted as Part HH of the 2026-2027 New York State Budget (Article 30-C of the Tax Law and Chapter 32 of Title 11 of the NYC Administrative Code). It is general information, not legal or tax advice.

After more than a decade of failed attempts, New York finally has a pied-à-terre tax. It passed on May 27, 2026 as part of the state budget, and it takes effect for the city fiscal year beginning July 1, 2026.

Most of the coverage has reported it as a tax on "second homes worth $5 million or more." That is half right, and the half that is wrong is the half that matters if you own a condo or co-op. The real threshold for apartments in the first two years is $1 million of Department of Finance market value, not sale price, and that distinction changes who actually pays.

Here is the part almost no one is explaining correctly: because of how New York values condos and co-ops, a unit that sells for $4 million can carry a DOF market value well under $1 million. So the $1 million "condo threshold" sounds like it sweeps in every nice two-bedroom in Manhattan. It does not. It reaches the genuine trophy tier and largely skips the rest, at least until 2028, when the rules change again.

This article walks through exactly how the surcharge works, who is exempt, what changed from the 2020 version of the bill, and a worked example with real numbers.

The one thing to understand first: market value is not sale price

For condos and co-ops, New York State law (Real Property Tax Law §581) requires the city to value the building as if it were a rental apartment building, not based on what units actually sell for. The result is that the Department of Finance "market value" for a luxury condo is a small fraction of its real-world price, often in the range of 5 to 15 percent.

The entire pied-à-terre surcharge is built on top of this quirk. Every threshold and rate in the law is keyed to DOF market value, the number that appears on your annual Notice of Property Value, not to anything a broker would quote you.

Who pays: the three property categories

The surcharge applies to a "covered property" that is not a primary residence. There are three categories:

Vacant land, commercial property, hotels, rental apartment buildings, new construction without a certificate of occupancy, and unsold sponsor units are all outside the tax.

The rates: a two-phase structure

The law runs in two distinct phases, and the difference between them is the most important thing in the statute.

Phase One — fiscal years 2026-27 and 2027-28. Valuation uses the current DOF market value (the depressed, rental-building-based number).

Class one homes (threshold $5M):

Condos and co-ops (threshold $1M):

The condo/co-op rates are far higher (4% to 6.5% versus 0.8% to 1.3%) for a deliberate reason: the values they are applied to are artificially low. The higher rate is meant to compensate for the depressed valuation. Apply 6.5% to a DOF value that is 10% of the real price and you land somewhere near the effective rate a house pays on its full value.

Phase Two — fiscal year 2028-29 onward. Everything resets. The threshold for all property types becomes $5 million, and the rates fall to the class-one schedule:

But here is the catch. In Phase Two, condos and co-ops are no longer valued as rental buildings. The law explicitly requires the city to value them using comparable sales, stripping away the §581 restriction. In other words, Phase Two values apartments at something close to what they actually sell for.

So the structure is: Phase One taxes depressed values at high rates above a $1M floor. Phase Two taxes real values at low rates above a $5M floor. The two phases reach very different sets of apartments.

Two worked examples: one escapes, one pays

The cleanest way to see how this works is to run two illustrative condos through the math. The numbers below are illustrative, not pulled from any specific listing, but they reflect the real relationship between sale price and DOF market value for NYC condos.

Example A — the $3.2M Chelsea condo that owes nothing. A two-bedroom condo asking around $3.2 million, with a DOF market value of $850,000.

Phase One: the condo threshold is $1,000,000 of DOF market value. At $850,000, this unit is below the threshold. Even as a pure pied-à-terre, it owes $0.

Phase Two: the threshold rises to $5,000,000 and valuation switches to comparable sales. At a comp value near $3.2M, it is still under $5M and owes $0.

A $3.2 million condo escapes the "second home tax" in both phases. This is the gap between headline and reality, and it describes a large share of the Manhattan condo market.

Example B — the $18M trophy unit, and why its bill grows. A full-floor condo on Billionaires' Row asking around $18 million, with a DOF market value of $2,400,000.

Phase One: $2,400,000 falls in the $1M–$3M condo band, taxed at 4.0%. Surcharge: $96,000 per year.

Phase Two: valuation switches to comparable sales (~$18M), landing in the $15M–$25M band at 1.05%. Surcharge: $189,000 per year.

Notice what happens. The rate falls sharply, from 4.0% to 1.05%, but the annual bill nearly doubles, because Phase Two replaces the depressed $2.4M assessment with the unit's real $18M value. For genuine trophy property, the 2028 transition is where the real money lands.

Caveat: a Phase Two DOF determination is set by the city's comparable-sales method and could differ from asking price. An asking price is not a closed comp. The direction holds: sub-$5M apartments are largely outside this tax, and high-value units see their bills rise in Phase Two.

What changed from the 2020 bill

This is not New York's first pied-à-terre tax attempt. State Senator Brad Hoylman introduced versions going back to 2014, with the best-known being S44/S44B in the 2019-2020 session. It died in committee, like all the others.

The 2020 bill was structured very differently from what passed:

The instinct is to assume the new law cast a wider net. It is actually the opposite at the entry point. A $300,000 assessed value (the 2020 floor) corresponds to roughly $667,000 of DOF market value, since class two assessed value runs about 45% of market value. So the 2020 bill would have caught apartments starting around $667K of market value, while the 2026 law does not engage condos until $1M of market value.

Run our $18M trophy unit through both regimes:

Under the 2020 bill: with a $2,400,000 market value, its assessed value (~45%) is roughly $1,080,000, far above the $300,000 floor. It is taxed at 10% to 13.5% on the excess assessed value above $300,000.

Under the 2026 law: that same $2,400,000 market value clears the $1M condo threshold and is taxed at 4.0% in Phase One.

Both versions catch the trophy tier. The difference shows up at the bottom of the market, where the 2020 bill reached down to roughly $667K of market value while the 2026 law stops at $1M.

Exemptions: how to not pay

The surcharge only applies to property that is not a primary residence. The exemption is broader than many owners assume. A property is treated as a primary residence, and escapes the surcharge, if it is the primary residence of any of the following:

For property held in a trust, LLC, or partnership, the analysis shifts to the beneficial or majority owner. If that person uses the unit as a residence, the exemption can still apply.

The "I own three units" myth

A common misreading floating around is that owning three or more units in a building creates an exemption. It does not. The law's "more than three units" language addresses a narrow definitional point: a single tax lot that itself contains more than three dwelling units, all under one owner (think a sponsor holding a block of apartments as one lot), falls outside the definition of a covered "residential condominium dwelling unit."

If you own three separate condo units, each is independently a covered property and each is tested on its own threshold and primary-residence status. Owning multiple units shields none of them. The law also adds a penalty of up to 50% of the surcharge for anyone who divides a unit into more than three pieces in bad faith to dodge the tax.

How the city decides, and how to fight it

The Department of Finance makes an initial determination each year of whether a property is a primary residence, measured as of the January 5 taxable status date. For the first year, DOF must send notice by August 30, 2026.

If you get an adverse determination, you can rebut it with:

DOF can audit any primary-residence certification for up to six years. Keep your records.

A trap for out-of-state owners who are NYC statutory residents: there is an unresolved question worth flagging. The surcharge turns on whether the property is a primary residence, which is a factual question about how the unit is used, applied separately from city income-tax residency. A person domiciled in Florida who spends more than 183 days in NYC may be a city statutory resident for income tax, yet still cannot show the apartment as a "permanent home address" on a New York resident return, because their domicile is elsewhere. On the current text, such an owner may be exposed to the surcharge even while paying full city income tax. This is exactly the kind of issue that will be litigated.

Co-op owners: the part that arrives later

For co-ops, the surcharge is billed to the cooperative corporation, which then collects it from the specific tenant-shareholders whose units are non-primary and over threshold. Boards should get ahead of this. If the building does not cleanly allocate the surcharge to the responsible shareholders, the cost can end up spread across owners who never had a pied-à-terre. This is a near-term governance item, not a wait-and-see one.

Administration, billing, and sunset

The bottom line

The pied-à-terre surcharge is real, it starts in July 2026, and for the genuine trophy tier it carries serious annual cost. But the "$1 million condo" framing in the press overstates its reach. Because the $1M Phase One threshold is measured against the city's deliberately depressed market value, most condos and co-ops under roughly $5 million of true market price fall outside it. The 2028 switch to comparable-sales valuation is the moment to watch, since it is when real values come into the calculation, and where the next round of owner challenges will concentrate.

If you own, or are buying, a high-value non-primary apartment in New York City, the questions to answer now are simple: what is your DOF market value, is the unit documented as a primary residence (yours, a family member's, or a long-term tenant's), and what will a comparable-sales valuation look like in 2028?

Sources: 2026-2027 New York State Budget, Assembly Bill A10009-C / Senate Bill S9009-C, Part HH (Tax Law Article 30-C; NYC Administrative Code Title 11, Chapter 32). Prior legislation: S44/S44B (2019-2020). NYC Comptroller, "The Pied-à-Terre Tax and Its Potential Revenues" (April 2026). NYC Department of Finance Notice of Property Value.

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