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In addition to regular property taxes, state and local governments around the country are increasingly looking to second homes as suitable candidates for an extra round of taxation to increase tax revenue. Proponents also cite these taxes as a way to combat the lack of available housing in many areas by spurring absentee owners to lease out second homes and avoid the tax. Critics say these new taxes will drive away second homeowners who boost local economies and already effectively subsidize local services (i.e. schools, trash removal, etc) by not using them year-round. So far the nicknames given to these laws are more memorable than the tax laws themselves, but the variety and ingenuity of these plans could represent a worrisome Summer storm on the horizon for many second homeowners.
In Rhode Island the recently enacted “Taylor Swift tax” (nicknamed after the world traveling popstar and her magnificent waterfront mansion in Watch Hill) creates an additional tax on homes that are uninhabited for at least 183 days a year. Headlines were also created in New York City this Spring when the State and City passed a romantic sounding “Pied-a-terre tax” with the rudely pragmatic goal (to some) of raising nearly $500 million each year from secondary homeowners with property valued over $5 Million. While final details on implementation are still being ironed out, a fiscal note released by the NYC Comptroller’s Office provides an excellent analysis of the new law: The Pied-à-Terre Tax and Its Potential Revenues – Office of the New York City Comptroller Mark Levine
With other similar tax proposals percolating up across the country, owners of second homes would be wise to keep an eye on the weather wherever they are.
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