New York City’s Pied-à-Terre Tax: How Trust And Entity Ownership Affects The Primary Residence Exclusion

On July 1, 2026, New York City’s new pied-à-terre tax (officially, the “Surcharge on Property That Does Not Serve as a Primary Residence”) took effect. The surcharge applies to certain one-, two-, and three-family homes, cooperative apartments, and condominium units that do not serve as a primary residence, provided the property’s assessed value exceeds the applicable statutory threshold.

Because the availability of the exemption turns on whether the property is used as a primary residence, an important question for many property owners is whether holding title through a trust or other entity avoids the surcharge. Based on the statute and the New York City Department of Finance’s current guidance, the answer appears to be no. Rather than focusing solely on the record owner, the City applies a “look-through” approach, examining the beneficial ownership of the property to determine whether the primary residence requirement is satisfied. As a result, simply transferring title to a trust, limited liability company, partnership, or corporation generally will not avoid the surcharge if the ultimate beneficial owner does not otherwise qualify for the exemption.

For trusts, the statute is clear that a residence may qualify for the primary residence exclusion if it is owned by a trust with a sole beneficiary who uses the property as that beneficiary’s primary residence. The treatment of trusts with multiple beneficiaries is less clear. If only one beneficiary occupies the residence as a primary residence, the current statutory language suggests that the exclusion may not be available, potentially subjecting the property to the surcharge. Additional guidance from the Department of Finance is being considered and will be helpful in clarifying these situations.

The analysis is similar for business entities. A residence owned by an LLC or other entity may qualify for the exemption if a majority ownership interest is held by individuals who use the property as their primary residence. For example, where an LLC is owned equally by two individuals, both owners generally would need to use the property as their primary residence for the exemption to apply.

Nevertheless, significant uncertainty remains. The legislation does not expressly address many common estate planning structures, including tiered ownership arrangements in which a trust owns an LLC, an LLC owns another entity, or ownership is otherwise held through multiple pass-through entities. Until the Department of Finance issues additional regulations or administrative guidance, the application of the primary residence exclusion to these structures remains uncertain.

Accordingly, property owners should not assume that existing trust or entity structures either trigger or avoid the new surcharge. Careful review of ownership arrangements is warranted to determine whether the primary residence exclusion is available and whether restructuring or other planning opportunities should be considered before the City makes its annual determination.

For the fiscal year beginning July 1, 2026, the Department of Finance is required to issue its initial determinations no later than August 30, 2026. Property owners will have 30 days to respond; even if notice is not received, it does not relieve the owner of potential application of the surcharge. Property owners should not wait until they receive a determination to evaluate their ownership structure and exemption eligibility, as proactive planning may avoid unnecessary disputes and preserve available planning opportunities.