By Jean L. Chou, Esq.
At JLC we strive for the kind of predictability and preparedness that means we're ready for any issues that may arise. A lot of our clients have had questions about the pied-à-terre tax that's dominated real estate headlines for weeks.
We wanted to add some nuance to this conversation to help you feel more prepared for what could come.
Its actual name is the"non-primary residence tax," and while it’s currently being challenged (its next hearing is August 31st), as of this post the Department of Finance (DOF) maintains an October 6th exemption filing deadline. The threshold that determines who it applies to can be misunderstood. What triggers the tax is the property’s DOF market value, not its sale price or actual market value. The two can be very different. A property that sold for $1.2 million, for example, can carry a DOF market value under $200,000. Most headlines have also shared that only those properties with sale prices of $5 million or more trigger the $1M DOF threshold, which is not always true.
Some pied-à-terre owners have received notices even though their unit’s actual sale value is, say $3 million, well below the $5 million figure most people believe is the cutoff but their DOF market value meets the $1M threshold. For co-op owners, the calculation is more nuanced. Co-op owners don’t receive an individual tax bill, only the Corporation does. To determine whether a coop unit exceeds the $1 million DOF threshold for a coop, the building’s total DOF market value is multiplied by that co-op unit’s percentage of ownership shares. Some coops also require escrow funds to be held at Closing if the seller’s unit may be subject to the surcharge. Bottom line: the tax bill for the building needs to be reviewed to properly evaluate.
If you’ve received a notice (17,000 owners have thus far), it’s worth having it reviewed to determine the type of exemption that may be needed.
For the 2026-27 and 2027-28 tax years, it can apply to one-, two-, and three-family homes valued by the Department of Finance at more than $5 million, and to condo or co-op units valued at $1 million or more. Surcharge rates range from 0.8% up to 6.5% of market value annually, depending on the property type and where it falls in the value bands.
Here are some helpful links:
- NYC Department of Finance - Eligibility Guide
- NYC Department of Finance - File for Exemption
- NYC Tax Commission - Appeal a Surcharge Determination
If you're buying or selling, or know someone who is, we're happy to help. You can contact us for a free consultation.
