What does the pied-à-terre tax cost for a $5 million apartment?
A $5 million Manhattan apartment designated as non-primary residence will incur a $325,000 annual surcharge under NYC's pied-à-terre tax, effective July 1, 2026.
The surcharge applies at 6.5% of the Department of Finance market value for Class 2 condominiums and cooperative apartments above $5 million. Unlike marginal tax brackets, the 6.5% rate applies to the full market value once the $5 million threshold is crossed.
For the estimated 182 Manhattan units valued above $5 million, this represents the tax's top bracket with no scheduled relief. The law sunsets June 30, 2031, creating a five-year liability window.
How is the surcharge calculated on market value versus assessed value?
The surcharge is calculated on DOF market value, not the assessed value used for regular property taxes.
The adopted DOF rules state the surcharge is 'calculated as the product of a surcharge rate established by statute and the market value of the applicable property.' For Class 2 properties, assessed values typically run 45% of market value, but the pied-à-terre tax ignores this discount.
A $7 million market-value apartment with a $3.15 million assessed value faces the surcharge on the full $7 million. The annual bill: $455,000.
What happens in Phase 2 starting July 2028?
Phase 2 beginning July 1, 2028 will shift condos and co-ops toward the lower Class 1 rate structure, but units above $5 million remain in the highest bracket.
The Class 1 schedule tops out at 1.3% for properties above $25 million, compared to Phase 1's 6.5% rate. However, the transition mechanics for determining which units qualify for lower rates depend on sales-based revaluations that have not been finalized.
For apartments already valued above $5 million, the Phase 2 shift offers limited relief. Market values in Manhattan's luxury segment typically exceed the $5 million threshold that triggers the top bracket under either phase.
Who qualifies for the primary residence exemption?
The exemption applies to units serving as the primary residence of the owner or immediate family members, defined as spouse, child, sibling, parent, grandparent, or grandchild.
Primary residence status is determined as of January 5 preceding each fiscal year, not by time spent in the unit during the year. A unit used as primary residence on January 5, 2026 avoids the surcharge for fiscal year 2027.
Units with 12-month arm's-length leases to natural persons also qualify for exemption. Corporate ownership requires majority-interest look-through to determine beneficial ownership.
When are exemption applications due?
Exemption applications are due September 18, 2026, extended from the original August deadlines.
DOF will mail non-primary residence notices by August 30, 2026. Owners have 30 days from the notice transmission date to appeal the designation.
The first surcharge payment is due January 1, 2027 for fiscal year 2027. Regular property tax abatements do not offset the pied-à-terre surcharge.
What is the five-year total exposure for high-value units?
A $10 million apartment faces $650,000 annually through Phase 1, totaling $1.3 million over two years ending June 30, 2028.
Phase 2 rates remain statutory direction rather than operational certainty, but the law's structure suggests continued top-bracket treatment for units above $5 million. Assuming the current 6.5% rate continues, the same unit would pay $3.25 million over five years to the June 2031 sunset.
The Comptroller projected approximately $500 million in annual revenue citywide, with the highest-value units carrying disproportionate liability relative to their numbers.
How can owners verify their market value and potential surcharge?
Owners can check their DOF market value on the Notice of Property Value mailed annually or through DOF's online property records.
The market value line determines surcharge liability, not the assessed value used for regular taxes. For co-op units, DOF calculates an imputed market value based on the building's total valuation and the unit's statutory share.
Use our free DOF market value checker to calculate your potential pied-à-terre tax liability and determine if exemption applications apply to your situation.