New tax targets some owners of second homes

First Citizens Wealth INTEL: Insights and News—Taxation, Election & Legislation

Each month, we'll cover time-sensitive updates on tax, election and legislative developments that could affect you.

New York State approved a new surcharge this year on certain New York City properties that don't serve as a primary residence, commonly known as the pied-à-terre tax. Pied-à-terre is a French term that translates to foot on the ground and is generally used to describe a second home maintained for occasional use.

The surcharge applies to certain secondary residences, including one-, two- and three-family homes valued by the New York City Department of Finance at more than $5 million and condominium and cooperative units valued at more than $1 million. It may also affect properties held through trusts and other entities. The measure is expected to generate roughly $500 million annually for New York City by imposing a surcharge on luxury properties owned by individuals whose primary residence is elsewhere.

What is the pied-à-terre tax?

During the law's initial phase, surcharge rates vary based on the property's valuation.

Current surcharge rates through June 30, 2028

• $1 million to $3 million: 4.0% annual surcharge
• $3 million to $5 million: 5.25% annual surcharge
• More than $5 million: 6.5% annual surcharge

Beginning July 1, 2028, condominium and cooperative units generally will become subject to a $5 million valuation threshold and a lower rate structure that aligns more closely with certain single-family homes.

To put the tax into perspective, a condominium or cooperative unit valued at $6 million would fall into the highest current tier and could incur an annual surcharge of approximately $390,000—calculated as 6.5% of the property's value.

Who is impacted?

You may be affected if you own a New York City property that isn't your primary residence and that meets the value thresholds established under the new law.

Property ownership through a trust, LLC or other entity can add complexity when determining whether an exemption applies. In some cases, ownership structure may affect eligibility for the primary residence exemption.

Some property owners may qualify for an exemption, including:

• Owners who live in the property for more than half the year
• Owners whose immediate family member uses the property as a primary residence
• Owners who rent the property to a tenant under a qualifying 12-month lease

New York isn't alone in exploring taxes tied to nonprimary residences and high-value assets. Rhode Island enacted a comparable measure—the Non-Owner Occupied Property Tax Act, nicknamed the Taylor Swift tax—that took effect July 1, 2026. The surcharge applies to properties valued above $1 million that aren't occupied by a resident owner. Maine's Real Estate Property Tax Relief Task Force also considered a surcharge on seasonal residences but stopped short of a formal recommendation.

What action is required and when

If you received a notice from the New York City Department of Finance indicating that your property may be subject to the surcharge, review the notice promptly and determine whether you qualify for an exemption.

Key deadlines

• September 18, 2026: Deadline to submit an exemption application
• March 1, 2027: Deadline for condominium and co-op owners to challenge an assessment
• March 15, 2027: Deadline for owners of one-, two- and three-family homes to challenge an assessment

Because exemption status is determined each year, property owners may also want to review residency, leasing arrangements and ownership structures before future assessment dates. While this new law has been the subject of a lot of litigation, the state continues to move forward with the implementation. Property owners who meet the requirements should plan for the additional cost, and prospective buyers in New York City should incorporate it into their budget analysis.

Who to talk to now

Real estate can represent a meaningful share of a family's overall wealth, and changes to the tax landscape can have implications across a broader wealth plan. A First Citizens Wealth consultant can help you understand how new tax developments may affect your property holdings, trust structures and other assets—and identify planning considerations before potential changes take effect.