New York passes Mamdani's pied-a-terre tax. Here's who pays and how much

New York City passed a tax on nonprimary residences, aimed at closing a budget gap. The pied-à-terre tax applies to second homes valued at $1 million or more and is expected to generate $500 million in revenue. The tax takes effect in phases. In the first phase, covering tax years 2026-2027 and 2027-2028, condos and co-ops valued above $1 million are taxed at tiered annual rates: 4% for $1 million to $3 million, 5.25% for $3 million to $5 million, and 6.5% for amounts above $5 million. Experts note the city’s assessment system undervalues properties, so the burden is reduced. Starting in 2028-2029, valuations will be based on comparable sales, and tax rates will drop to offset higher valuations.

"The so-called pied-a-terre tax will be imposed on second homes valued at $1 million or more. It's expected to raise $500 million in revenue. Details on the tax obtained by CNBC show that the property tax would take effect in two different phases. In the first two years the tax years 2026-2027 and 2027-2028 condos and co-ops valued at more than $1 million by the city's Department of Finance will be subject to the tax."

"Properties worth between $1 million and $3 million will face a 4% annual tax; properties valued at $3 million to $5 million will face a 5.25% tax; and those above $5 million will face a 6.5% tax. While the tax seems large, experts say the city's antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said."

"Rather than overhaul the system immediately, the city will gradually update valuations and the tax according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate. After the valuation adjustments, properties worth between $5 million and $15 million will be subject to a tax rate of 0.8%; properties between $15 million and $25 million will be taxed at 1.05%; and properties over $25 million will be taxed at 1.3%, according to the budget plan."

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