What Does the Pied-a-Terre Tax in NYC Mean for You?
There has been a lot of hubbub, confusion and misinformation around the recently enacted pied-a-terre tax that became effective today.
What is a Pied-a-Terre?
Your residential property in NYC would be considered a pied-a-terre if it is not your primary residence. This includes condos, co-ops and townhomes. Primary residences are generally exempt, as are many apartments that are rented out to tenants who use them as their primary residence.
What Does/Does Not Constitute a Primary Residence?
- You own multiple homes: You can only claim one home as your primary residence. If you own multiple homes in NYC, and the ones you don’t claim as your primary residence are not rented to tenants who use them as their primary residence, they would be subject to the pied-a-terre tax.
- LLC ownership: If you own in an LLC or a partnership, it can be difficult to prove primary residence. A single person should hold a majority stake in the property to help establish primary residence.
- Mixed trust ownership: Homes held in a trust are only exempt if the sole beneficiary uses the property as their primary residence.
- Unregistered primary residence: You must be able to prove primary residence with the Department of Finance and file your New York State resident income tax listing that address as your permanent home.
Is Your Property a Highly Valued Property?
If not, you can stop reading now, as you will not be affected by the pied-a-terre tax.
If you are pied-a-terre owners of a highly valued property, this summary details what is now effective and what is coming in two years.
Phase 1 of the Pied-a-Terre Tax in NYC
The first phase (July 2026 through July 2028) is using the Department of Finance estimated market value for all property types. However, the calculation of estimated market value differs for condos/co-ops and 1-3 family homes. For condos and co-ops, the estimated market value is much lower than actual market value; whereas, for 1-3 family homes, it is more closely pegged to actual market value. For this reason, the tax amounts applied differently, as detailed below.
For these first two years, the pied-a-terre tax will be assessed on condos and co-ops with an estimated market value of $1M or more. However, the “estimated value” of some $10M apartments is below $1M. This is because, under the current tax code, the city values condos and co-ops as “rental buildings” rather than at true, real-world market prices. Yes, the tax code is quite strange. If you own a 1-3 family home as a pied-a-terre owner, and your estimated market value is below $5M (which actually aligns with true market value), the pied-a-terre tax will not come into play for the next two years.
You can check your estimated market value on the Department of Finance website, or reach out to us: Rebecca at 917-696-2697 rebecca@digsrealtynyc.com, or Dan at 917-675-0037 dan@digsrealtynyc.com to pull that information for you.
If the estimated market value of your NYC co-op or condo is above $1M, or above $5M on your 1-3 family home, we detail some options below to make the pied-a-terre tax inapplicable.
How much is the pied-a-terre tax in Phase 1?
Condos and Co-ops
$1,000,000 – $3,000,000 estimated market value: tax is 4% of the estimated market value, due annually
$3,000,000 – $5,000,000 estimated market value: tax is 5.25% of the estimated market value, due annually
Over $5,000,000 estimated market value: tax is 6.5% of the estimated market value, due annually
1-3 Family Homes and Townhouses
Under $5,000,000: Exempt
$5,000,000 – $15,000,000 estimated market value: tax is .8% of the estimated market value, due annually
$15,000,000 – $25,000,000 estimated market value: tax is 1.05% of the estimated market value, due annually
over $25,000,000 estimated market value: tax is 1.3% of the estimated market value, due annually
Phase 2 of the Pied-a-Terre Tax in NYC
In phase 2, assuming everything plays out the way the legislation is currently written and approved, the city plans to move to a valuation system on condos and co-ops that more closely reflects actual market values. At that point, there will be a pied-a-terre tax on the actual market value of properties valued at $5M and more, which will align with the progressive tax rates that currently apply to 1-2 family homes (see above).
How to Insulate your Property from the NYC Pied-a-Terre Tax
If you have a property as a pied-a-terre that is subject to the pied-a-terre tax based on its estimated market value, there are still some ways to avoid being subject to this tax.
- Dispute the DOF’s estimated market value – the law outlines a specific multi-step legal pathway to do this
- Move to NYC and declare the property as your primary residence
- Move an immediate family member (spouse, children, parents, siblings, grandparents or grandchildren) into the apartment and have them use it as their primary residence
- Rent the apartment out to an arm’s-length tenant who uses it as their primary residence for a term of at least one year