NYC’s New Pied-à-Terre Tax: What Property Owners Need To Know

On July 22, 2026, New York City began formally implementing a new annual surcharge, referred to as the “pied-à-terre tax”, on certain non-primary residential properties, touted as a way to close an historic budget gap without reducing essential services or raising taxes and fees on working New Yorkers. The tax applies to New York City fiscal years beginning on or after July 1, 2026, and unless renewed is currently scheduled to expire on June 30, 2031. The tax applies to one-, two-, and three-family homes with a Department of Finance (“DOF”) property tax valuation exceeding $5 million, and cooperative and condominium residences with a DOF property tax valuation exceeding $1 million, in each case, when the owner has a separate primary residence

On July 22, 2026, the DOF began mailing notices to owners of New York City residential properties for which its records did not establish primary-residence status. Owners who received a notice but believe their property qualifies as a primary residence have the opportunity to dispute the designation and apply for an exemption. The rollout, however, was far from smooth: DOF first published a list that captured over 960,000 properties that could be potentially subject to the pied- à -terre tax, however, the City later clarified that only a small fraction, 17,000, of those property owners who received DOF notices in the mail, are potentially subject to the tax, causing confusion among property owners. As a result, a group of City residents have filed a legal challenge to the implementation of the new law in New York Supreme Court, Richmond County (Staten Island), as is discussed more fully below. 

Below is a summary of the key provisions property owners should be aware of.

1. Which Properties Are Subject to the Tax; Exemption Eligibility 

The pied-à-terre tax, beginning on July 1, 2026, is an annual surcharge imposed on New York City non-primary residential properties, specifically: (i) one-, two-, and three-family homes with a DOF property tax valuation exceeding $5 million; and (ii) cooperative and condominium residences with a DOF property tax valuation exceeding $1 million. However, beginning on July 1, 2028, the tax will apply only to single-family homes, cooperatives, and condominiums valued at $5 million or more.

Exempt properties are those that serve as the primary residence of the owner, a tenant or subtenant, an immediate family member of the owner or the majority interest holder or one or more individuals who collectively hold a majority interest in an entity that owns the property, or the sole beneficiary or beneficiaries of a trust that directly owns the property.

2. Applicable Tax Rates 

For property tax years 2026-27 and 2027-28, the specific rates are as follows:

Before July 1, 2028, the Surcharge Rate will be applied to the current tax assessed value of each property in question. Starting on July 1, 2028, however, the surcharge rate will instead be applied to the property’s value under a new DOF assessed-value system that has yet to be released.

3. How to Find Out If You Are on the List and How to Apply for an Exemption

Are You on the List? 

On July 22, 2026, the DOF mailed approximately 17,000 notices to property owners of New York City residential properties for which its records did not establish primary-residence status. Separately, on July 24, 2026, the DOF published a supplemental market value roll on its Property Assessments page. The roll includes all one-, two-, and three-family homes that may be subject to the surcharge as well as all cooperative and condominium properties, including each individual cooperative unit in any building in which at least one unit may be subject to the surcharge. Importantly, the DOF clarified that only those property owners who received notices from the DOF are potentially subject to the surcharge.

Deadline to Apply for an Exemption & How to Apply

The original exemption deadline was August 21, 2026 (or August 24, 2026 for cooperative units), but on August 1, 2026, the DOF extended the deadline to September 18, 2026, for all property owners who received a notice, regardless of the type of residential property involved.

Each notice contains a website link and a personalized PIN, which must be used to file an exemption claim electronically. Exemption applications can be submitted at: www.nyc.gov/npsurcharge.

Required Documentation for Exemption Applications 

The documents required depend on who is using the property as a primary residence:

• If the property is used as the primary residence of the owner, they must provide the most recently filed federal or state tax return, or a driver’s license or other DMV-issued identification. If a tax return or DMV-issued identification is not available, a voter identification card or other proof showing the property is the owner’s primary residence may be provided.
• If the property is used as the primary residence of tenants or subtenants, they must provide either a copy of the current lease and one additional rental document (such as a utility bill, proof of rent payment, or renter’s insurance policy), or a Tenant or Subtenant Affidavit and two additional rental documents.
• If the property is used as the primary residence of an immediate family member(s), they must provide primary residence documents (listed above) plus documentation proving the family relationship, such as a birth certificate, marriage certificate, or an Immediate Family Member Affidavit.
• If the property is owned by a business entity and used as a primary residence by a majority member, shareholder, or partner, owners must provide primary residence documents (listed above) plus relevant governing documents (e.g., LLC operating agreement, partnership agreement, or articles of incorporation) and a Majority Interest Affidavit.

The DOF will review submitted applications and documents, and will send a determination letter and email advising whether the exemption application has been approved. If the application is denied, a property owner may file an application with the New York City Tax Commission to appeal the DOF’s determination.

4. Recent Legal Challenges

On August 7, 2026, a group of New York City homeowners filed suit against the City in Staten Island Supreme Court, seeking to halt implementation of the tax pending further judicial review. On August 10, 2026, a judge issued an emergency pause on the implementation of the surcharge, with the next hearing set for August 31, 2026. On August 11, 2026, the City filed a notice of appeal of the emergency pause order.

At the heart of the complaint is the DOF’s decision to publish a database of over 960,000 properties as potentially subject to the surcharge and to mail warning notices to roughly 17,000 homeowners. The plaintiffs allege that the vast majority of both the published list and the noticed homeowners do not meet the requirements of the surcharge and the City’s framework has placed the burden on ordinary homeowners to prove their property is exempt from the surcharge, rather than doing the necessary investigation to accurately identify which properties actually qualify. According to an expert affirmation filed alongside the suit by the former commissioner of the DOF, the number of properties that meet the statutory value thresholds is estimated to be somewhere between 5,000 and 6,000, suggesting that fewer than 3% of the over 960,000 properties listed on the database meet the statutory threshold, and the approximately 17,000 notices were sent to roughly three times as many homeowners as should have received them.

The lawsuit asks the court to declare both the published database and the mailed notices unlawful, remove the list from the DOF’s public website, and pause the obligation for notice recipients to respond while the litigation proceeds. The City has stated that the Law Department is prepared to vigorously defend the surcharge and the City’s actions in implementing it. 

We will continue to monitor developments as additional guidance is issued by the DOF, and as the lawsuit progresses. If you have questions about whether your property may be subject to the surcharge or need assistance with the exemption application process, please reach out to any of the Sheppard attorneys listed below.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.