The tax is not applied when one or more owners, their immediate family members, lessees or sublessees (with a lease agreement for one or more years) use the home as a primary residence.

New York City’s tax on second homes exceeding certain market values, also known as a “pied-à-terre” (meaning “foot on the ground” in French) tax, took effect on July 1, 2026, and could reach more than 13,000 second homes located in the city. New York Governor Kathy Hochul hoped this tax would support Mayor Zohran Mamdani’s budget goals, and it could generate at least $500 million in new revenue. Given the speed with which this bill passed, there are lingering questions on how the tax will be applied to homeowners in the five boroughs, particularly to trusts.

Covered Owners and Property

The pied-à-terre tax is imposed on homeowners of certain residences located in New York City when the home is not a primary residence. Trust beneficiaries, majority partners, shareholders or members of partnerships, corporations or limited liability companies holding New York City residences could also be impacted by the tax.

The tax is not applied when one or more owners, their immediate family members, lessees or sublessees (with a lease agreement for one or more years) use the home as a primary residence. Only one home of a given individual can be considered his or her primary residence.

Impact on Trusts and Estates

With respect to a residence owned by a trust, the tax will be imposed (assuming the valuation thresholds, described below, are met) unless there is only one beneficiary and that sole beneficiary uses the home as a primary residence. The law makes no reference to estates holding New York residences, so it is unclear how the tax will be imposed when estates hold such property, whether or not it was the decedent’s primary residence.

This tax law was passed quickly, and there are currently no regulations issued by the New York City Department of Finance to clarify the ambiguities. The city will notify property owners by August 30, 2026, if they are subject to the tax.

How the Tax Works

The pied-à-terre tax applies in two phases. Between July 1, 2026, and July 1, 2028, the tax covers single-family and one- to three-family homes with a market value that is $5 million or more (Class 1 property) and residential condos or co-ops with a market value that is $1 million or more (Class 2 property) that are not primary residences in each case. Class 1 homes are exposed to the following tax rates: 0.8 percent for residences valued between $5 million and $15 million; 1.05 percent for residences valued between $15 million and $25 million; and 1.3 percent for residences valued over $25 million. Class 2 co-ops and condos are subject to the following rates: 4 percent for residences valued between $1 million and $3 million; 5.25 percent for residences valued between $3 million and $5 million; and 6.5 percent for residences valued over $5 million. The Department of Finance will determine valuations for both Class 1 and Class 2 properties during this phase.

Starting July 1, 2028, the tax reaches second homes with a market value equal to or greater than $5 million, including Class 2 properties. Any covered property is subject to the following rates: 0.8 percent for residences valued between $5 million and $15 million; 1.05 percent for residences valued between $15 million and $25 million; and 1.3 percent for residences valued over $25 million. In this second phase, the Department of Finance will determine the valuation for Class 1 property, while Class 2 property valuations will be based on sales of comparable units and no longer the determination of the Department of Finance.

For More Information

If you have any questions about this Alert, please contact Reshma Shah, Amy J. Guss, Joshua E. Steinberg, any of the attorneys in our Private Client Services Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.