New York State has officially approved a surcharge on certain real properties within New York City that do not serve as primary residences. Commonly known as the NYC pied-terre tax, this surcharge targets high-value, secondary properties.
The New York City Department of Finance recently issued final regulations to clarify the law. However, strict structural definitions leave many entity-owned properties vulnerable.
If you or your clients receive a letter indicating potential liability, you must act quickly. The deadline to submit a surcharge exemption application is September 18, 2026.
The tax applies to specific residential properties that meet minimum valuation thresholds and do not serve as a primary residence:
Excluded Properties: Properties lacking a temporary or permanent certificate of occupancy, or unsold units still under an active offering plan.
To qualify for an exemption, the property must be a principal residence as of the January 5th taxable status date preceding the fiscal year. Mid-year occupancy or ownership changes will not alter the tax bill for that year. It appears that whether a property is a principal residence may be determined by your income tax filing status. In other words, if you file a New York income tax, then your New York residence is your primary residence. However, if you do not file a New York income tax because you claim you are a resident of another state, like Florida, then, your New York Residence is not your primary residence, unless you can prove otherwise.
A property qualifies as a primary residence if it is occupied by:
Exceptions: Primary residency status is preserved for one year following an owner's death, or during a continuous period of hospitalization/rehabilitation.
The DOF is interpreting ownership structures strictly. An individual cannot establish primary residency through a multi-tier business entity structure.
The property must be owned by a trust where the resident is the sole beneficiary. While the DOF clarifies that contingent or future interests are ignored, traditional "pot trusts" (which feature multiple beneficiaries) will likely trigger the tax, even if only one beneficiary lives there. Therefore, if an irrevocable trust owns the primary residence of one of multiple beneficiaries, then, the irrevocable trust should be reviewed to determine if the trust can be divided so that the primary residence of one of the trust beneficiaries is transferred to a subtrust that has one beneficiary who use the trust own residence as a primary residence.
A partner, shareholder, or member must hold a majority interest (greater than 50% of voting power, value, or capital/profits). Crucially, the entity must have an undivided 100% interest in the property. If LLC 1 owns 99% and LLC 2 owns 1%, the property is subject to the tax, even if the sole owner of LLC 1 lives there full-time.
The tax is being implemented in two phases. Phase One is underway.
During this initial phase, market value is determined by the DOF using the current property tax roll methodology. Rates are split by property class:
Class 1 Properties (1-3 Family Homes)
Applies only to homes valued at $5,000,000 or greater.
Class 2 Properties (Condos & Co-ops)
Applies to units valued at $1,000,000 or greater.
Starting July 1, 2028, Phase Two will unify all rates and valuations for both Class 1 and Class 2 properties.
Because the January 5th taxable status date has passed, current fiscal year outcomes cannot be altered. However, immediate planning is required for future tax years. Owners should review their holding structures, evaluate trust terms, and ensure all exemption paperwork is filed before September 18, 2026. Moreover, action may need to be taken before January 5, 2027, if you want to ensure that a residence is a primary residence to avoid the NYC pied-terre tax.
For those clients who have property in the City of New York, or in trust, contact the attorneys at Altman & Associates at 301-468-3220 or via the website at altmanassociates.net.
