Today, the New York State Legislature passed the Pied-à-Terre Tax as part of the state budget. It takes effect July 1, 2026. And if you own — or are considering purchasing — a non-primary residence in New York City valued above $5 million, this changes your math.
Not in theory. Right now.
I've spent the last 48 hours on the phone with clients, attorneys, and tax advisors walking through the implications. What's clear is that most owners don't yet understand how this tax actually works, and the difference between getting it right and getting it wrong is hundreds of thousands of dollars a year.
Here's the real breakdown — from someone sitting in the middle of it.
What the Tax Is
The Pied-à-Terre Tax is a new annual surcharge on residential properties in New York City that are not used as a primary residence. It applies to condominiums, cooperatives, single-family homes, two-family homes, and townhouses. It also applies to properties that are rented out — if the tenant is not using the unit as their primary residence.
This is not a one-time tax at closing like the mansion tax. This is a recurring annual cost on top of your existing property taxes, assessed every year you hold the property.
How It Works: Two Phases, Two Valuation Methods
This is where it gets complicated — and where most of the confusion lives.
The tax rolls out in two phases, and the way your property is valued depends on both the phase and the type of property you own.
Phase 1
July 1, 2026 through June 30, 2028.
During this period, condos and co-ops (Class 2 properties) are taxed based on their DOF Assessed Market Value — the value listed on your NYC Department of Finance property tax bill. This is not your purchase price. For most luxury condos in Manhattan, the DOF value is a fraction of what the unit actually trades for on the open market. A condo that closed for $20 million might carry a DOF Assessed Market Value of $1 million to $3 million. That's a feature of New York's famously opaque assessment system, and during Phase 1, it works in your favor.
The Phase 1 rates for condos and co-ops are:
-
DOF Assessed Market Value of $1M–$3M: 4.0%
-
DOF Assessed Market Value of $3M–$5M: 5.25%
-
DOF Assessed Market Value above $5M: 6.5%
For single-family homes and townhouses (Class 1 properties), Phase 1 uses the actual market value based on closing records, with rates of 0.8% ($5M–$15M), 1.05% ($15M–$25M), and 1.3% (above $25M).
Phase 2
Begins July 1, 2028 and applies to all property types using the same methodology: actual market value as per closing records.
At that point, condo and co-op owners lose the DOF assessment shield, and the tax is calculated against what you actually paid.
The Phase 2 rates for all properties:
-
Actual Market Value of $5M–$15M: 0.8%
-
Actual Market Value of $15M–$25M: 1.05%
-
Actual Market Value above $25M: 1.3%
The jump from Phase 1 to Phase 2 is where the real impact lives. A luxury condo owner who is paying $50,000–$100,000 per year during Phase 1 could be looking at $150,000–$300,000+ per year once Phase 2 kicks in — depending on the purchase price.
What This Means If You Currently Own
If you own a non-primary residence in Manhattan and it's sitting empty, the clock starts July 1. That's 33 days from today.
Every month that unit sits vacant is now carrying not just your existing property taxes, common charges, and mortgage costs — but an additional annual surcharge that, depending on your DOF valuation, could add $50,000 to $100,000 or more per year during Phase 1 alone.
I'm already having conversations with clients where this tax fundamentally changes their hold-versus-sell analysis. An owner who was comfortable carrying a property while waiting for the right sale price may not be comfortable carrying it with an additional six-figure annual tax layered on top.
The Rental Exemption Is Real — And It's Strategic
There is an exemption, and it matters. The law exempts properties that are rented full-time to a tenant who uses the unit as their primary New York City residence. If your tenant lives there as their primary home, you owe zero pied-à-terre tax.
But here's the nuance: if your tenant is using your property as their own pied-à-terre — a secondary residence, an occasional crash pad, a place they stay when they're in town — the exemption does not apply.
For owners who are considering the rental route, this means tenant screening just became a tax strategy. You want a tenant who is establishing or maintaining primary residency in New York City. That's executives relocating for work, international families anchoring in Manhattan, and high-net-worth individuals consolidating their home base. At the top end of the rental market, that profile absolutely exists — and finding the right one could save you hundreds of thousands of dollars per year.
What This Means If You're Buying
If you're purchasing a luxury property in Manhattan as a secondary residence, you now need to underwrite a new annual carrying cost that didn't exist 24 hours ago.
At the $20 million price point, Phase 2 adds roughly $210,000 per year.
At $30 million, you're looking at $390,000 per year.
Every year.
That changes the total cost of ownership calculation meaningfully. Some buyers will absorb it without blinking. Others will recalibrate — either negotiating harder on price, shifting their search to properties they intend to use as a primary residence, or exiting the New York market entirely.
For buyers who plan to make their purchase a primary residence, this tax is irrelevant. And that creates an interesting dynamic: primary-residence buyers now have a structural advantage over pied-à-terre buyers in negotiations. If you're competing for a unit and the seller knows you'll live there full-time, you may be a more attractive buyer than someone who needs to underwrite an additional annual tax — especially if the seller is motivated.
The Next 30 Days Matter
The market hasn't fully priced this in yet.
Attorneys are still reading the legislation.
Tax advisors are still running scenarios.
Most owners of non-primary residences on Billionaires' Row, in Tribeca, on the Upper East Side — they got the news today. They haven't made decisions yet.
That window is where opportunity lives.
Sellers who want to transact before the market adjusts have urgency they didn't have yesterday.
Buyers who move quickly can negotiate with leverage they won't have in September.
I've been advising my clients all day on how to position — whether they're holding, selling, renting, or buying. The strategy is different for each one, but the common thread is the same: this tax is real, it's happening in 33 days, and the owners who move with information and intention are going to come out ahead of the ones who wait.
About Nile Lundgren
Nile Lundgren is the founder of The Lundgren Team at SERHANT., specializing in luxury residential sales, new development, and investment real estate across New York City, Westchester, Miami, and international markets.
For questions about how the Pied-à-Terre Tax impacts your property or purchase strategy, reach out directly at [email protected].
Want to build a sharper real estate business? Explore Lundgren365 Coaching with Nile Lundgren for systems, follow up, positioning, and execution that actually move deals.
Thinking about buying, selling, investing, or making a smarter real estate move? Contact Nile Lundgren and The Lundgren Team to start the conversation.
