The Surcharge at a Glance
New York City’s new Pied-à-Terre surcharge takes effect on July 1, 2026. The annual surcharge applies to residential properties that owners do not use as their primary residence. It does not apply to properties rented to tenants under bona fide leases of at least one year, nor to properties used as a primary residence by an immediate family member of the owner. An estimated 10,000 properties will be affected.
Surcharge rates from July 1, 2026 through June 30, 2028 are as follows:
- Class One (one-to-three family homes): 0.8% ($5M–$15M), 1.05% ($15M–$25M), 1.3% (over $25M)
- Class Two (condos and co-ops): 4% ($1M–$3M), 5.25% ($3M–$5M), 6.5% (over $5M)
Beginning July 1, 2028, all properties will be surcharged using the Class One rates, and condos and co-ops will be revalued based on comparable sales rather than the current suppressed methodology.
Valuation and Practical Considerations
New York City often assesses property values well below fair market value — valuations can be 10% or less of true market value. This means the surcharge thresholds may capture properties at lower market values than the dollar figures suggest. The 2028 revaluation of condos and co-ops using comparable sales data could significantly increase assessed values and surcharge exposure for those properties.
There are no simple workarounds. The surcharge applies regardless of whether the property is held in a trust, partnership, LLC, or corporation. Establishing primary residency in New York to avoid the surcharge could trigger other significant tax consequences.
For those who hold property through a trust or entity, the primary residence exemption may not be available. The exemption only applies if the resident is the sole beneficiary of the trust, or holds a majority interest in the partnership, LLC, or corporation that owns the property. Otherwise, the surcharge may apply even if the person lives there permanently.
Steps for Property Owners
- Review your property portfolio. Identify any New York City residential properties that are not used as a primary residence and assess potential surcharge exposure based on current assessed values.
- Evaluate available exemptions. Determine whether any properties qualify for the primary residence, bona fide tenant lease, or immediate family member exemption—and whether any entity ownership structures may limit eligibility.
- Plan for the 2028 revaluation. If you own condos or co-ops, be aware that assessed values may increase substantially in 2028 when the new valuation methodology takes effect.
- Consult your tax advisor. Given the complexity of the surcharge and the interplay with broader tax considerations—including domicile and entity structuring—property owners should consult with their advisors to understand the full impact.
YES! PLEASE SIGN ME UP TO RECEIVE EMAIL ALERTS FROM OTHER GUNSTER PRACTICE AREAS.
Gunster. Florida's Law Firm for Leaders.
As a full-service law firm, Gunster provides legal counsel to leading organizations and individuals from its 13 offices statewide. Established in 1925, the firm has expanded, diversified, and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Coral Gables, Fort Lauderdale, Jacksonville, Miami, Naples, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, Vero Beach, and its headquarters in West Palm Beach. With more than 320 attorneys and consultants and 300 committed support staff, Gunster is ranked among the top 200 largest law firms by the National Law Journal and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practices, industries, offices, and news is available at www.gunster.com.
