New York passes pied-a-terre tax: who pays, rates and timeline
New York City's new tax on second homes is expected to significantly increase property taxes for many wealthy luxury apartment owners. State lawmakers have passed the tax on nonprimary residences to help close the city's budget gap.
The so-called pied-a-terre tax will apply to second homes valued at $1 million and above. It is expected to raise about $500 million in revenue.
Phased in over two stages: first levied in 2026-2027 and 2027-2028
According to tax details obtained by CNBC, the property tax will be implemented in two phases. In the first phase, covering tax years 2026-2027 and 2027-2028, condos and co-ops valued at more than $1 million by the New York City Department of Finance will be subject to the tax.
The rates are as follows: properties valued at $1 million to $3 million will be taxed at 4% annually; properties valued at $3 million to $5 million will be taxed at 5.25%; and properties above $5 million will be taxed at 6.5%.
Although the rates look high, tax experts say the city's outdated valuation and assessment system significantly undervalues properties, reducing the real burden. They said city valuations can sometimes be only 10% or less of true market value.
Valuations updated gradually: from 2028-2029, pricing based on comparable sales
Rather than overhauling the system immediately, the city will gradually update valuations and taxes according to the budget documents. Starting in the 2028-2029 tax year, property values will be based on comparable sales. Because valuations may rise sharply, tax rates will fall accordingly.
After the valuation changes, properties valued at $5 million to $15 million will face a 0.8% rate; properties valued at $15 million to $25 million will face a 1.05% rate; and properties above $25 million will face a 1.3% rate.
"It's incredibly complicated," said Robert Pollack, a New York property tax attorney.
Ken Griffin becomes the public face: tax burden could surge
After the new tax was introduced, billionaire and Citadel CEO Ken Griffin became the tax's public face after New York City Mayor Zohran Mamdani posted a video in front of his apartment. Griffin later pushed back, saying he may reduce business and jobs in New York in the future.
CNBC calculations show that, as a Florida tax resident, Griffin's Manhattan property tax bill would more than triple under the new tax. Griffin bought his 24,000-square-foot penthouse at 220 Central Park South in 2019 for $238 million. But government records show the city values the apartment at just $15.5 million.
Based on city records, Griffin's property tax bill for the 2026-2027 tax year is $858,332. Pollack said that in the first two years of the pied-a-terre tax, the bill would rise to more than $1.87 million. After the 2028-2029 tax year, it would approach $4 million.
Griffin also reportedly bought two apartments at 740 Park Ave. for a total of $83 million. Based on reports, the tax on those units would be $1.1 million starting in 2028, bringing the total property tax bill on all his Manhattan properties to more than $5 million.
While city officials say the wealthy can afford it, real estate brokers and tax attorneys say the sticker shock could be significant. Pollack said: "All my clients already feel they pay too much. The numbers are huge, no matter how rich you are."
