New York City property owners may have received a Department of Finance (DOF) notice indicating that their property may be subject to the City’s new non-primary residence property surcharge. Importantly, the deadline to respond has been extended (multiple times) and is now October 6, 2026.
DOF sent notices to owners of properties that may be subject to the surcharge, including properties for which City records did not allow DOF to confirm primary-residence use, so receiving a notice does not necessarily mean the surcharge is owed. For owners who have received notice, the key question is whether the property qualifies for an exemption based on how the property is used.
For the 2026-27 and 2027-28 property tax years, the surcharge, often referred to as the pied-à-terre tax, applies to certain high-value NYC residential properties that are not used as a primary residence.
For one-, two-, and three-family homes, the statutory rates are:
- 8% if the phase one market value is greater than or equal to $5,000,000, but less than or equal to $15,000,000;
- 05% if the phase one market value is greater than $15,000,000, but less than or equal to $25,000,000; and
- 3% if the phase one market value is greater than $25,000,000.
For condominium and cooperative units, the statutory rates are:
- 0% if the phase one market value is greater than or equal to $1,000,000, but less than or equal to $3,000,000;
- 25% if the phase one market value is greater than $3,000,000, but less than or equal to $5,000,000; and
- 5% if the phase one market value is greater than $5,000,000.
For fiscal years beginning on or after July 1, 2028, the statute shifts to a phase two market value framework and applies a $5 million threshold for covered properties and covered cooperative units.
Litigation Update
Several property owners have challenged New York City’s implementation of the surcharge in court, arguing that the City improperly identified properties as potentially subject to the tax. Although a trial court issued a temporary restraining order in August 2026, that order was quickly stayed pending appeal, and the City’s administration of the surcharge has continued while the litigation proceeds. The challenge appears directed principally at DOF’s implementation and notice procedures, not at a final ruling invalidating the underlying surcharge. As a result, property owners should treat the October 6, 2026, deadline as live unless DOF or a court formally changes it.
When Is a Property Exempt?
A property is exempt from the surcharge if it is used as a primary residence by a qualifying person, which can include:
- the owner of the property;
- a tenant or permitted subtenant;
- one or more individuals who collectively hold a majority interest in the LLC, corporation, or partnership that owns the property;
- an immediate family member of the owner or majority interest holder (“Immediate family member” means a spouse, child, sibling, parent, grandparent, or grandchild); or
- the sole beneficiary of a trust that owns the property or holds the cooperative shares.
Primary residence status is determined as of the taxable status date of January 5th immediately preceding the fiscal year for which the surcharge is imposed. Accordingly, for the 2026-27 property tax year, the relevant date to determine primary residence status is January 5, 2026.
Special Considerations for Entity-Ownership
If a property is owned by an LLC, partnership, or corporation, the exemption can apply where the property is used as a primary residence by one or more individuals who collectively hold a majority interest in the entity.
If a property or cooperative shares are held in trust, the exemption can apply where the beneficial owner or owners are the sole beneficiaries of the trust and the property is used as a qualifying primary residence.
If the exemption is based on a tenant or subtenant’s use, the tenant or subtenant must be a natural person occupying the property under a bona fide lease negotiated at arm’s length with a term of at least one year.
Therefore, in an entity-ownership situation, claiming an exemption requires confirmation that the person using the property as a primary residence satisfies the applicable ownership, lease, entity, or trust requirements, and proper documentation is provided and retained.
What Documentation Is Needed?
DOF’s current guidance says that owners applying for an exemption should be prepared to provide one of the following for each occupant identified as using the property as a primary residence:
- the most recently filed federal or state tax return; or
- a driver’s license or other DMV-issued identification.
If those documents are not available, DOF states that the applicant can provide both a voter identification card and other proof showing that the property is the occupant’s primary residence.
Additional documentation may be required depending on the facts, and for entity-owned or trust-owned properties, DOF may request primary-residence documents and ownership documents, such as a partnership agreement, trust agreement or affidavit, LLC operating agreement, articles of incorporation, and a majority interest affidavit.
Value Challenges
If the property is used as a qualifying primary residence, a DOF exemption application is generally the most direct path. However, if the concern is that DOF has overvalued the property, the owner should consider whether to file a challenge with the New York City Tax Commission. For the 2026-27 and 2027-28 tax years, the Tax Commission lists the following surcharge appeal deadlines:
- March 1, 2027, for Tax Class Two properties; and
- March 15, 2027, for Tax Class One properties.
The guidance states that an owner can ask the Tax Commission to consider whether the property is used as a primary residence only if the owner is also challenging the property value. If the owner asks the Tax Commission to consider primary residency, DOF will not consider a DOF exemption submission for the same property and will defer to the Tax Commission’s decision. Additionally, if an owner first applies to DOF for an exemption and DOF issues a final denial, the owner may appeal that final DOF residency determination to the Tax Commission by the applicable March 1 or March 15 deadline, or within 30 days of the date on DOF’s final determination notice, whichever is later. A market value challenge, however, still must be filed by the applicable March 1 or March 15, 2027, deadline.
Next Steps
Owners who received a notice should act before the new October 6, 2026, deadline by:
- confirming whether the property falls within the covered property categories;
- reviewing the DOF market value shown for the property or unit;
- determining who used the property as a primary residence as of January 5, 2026;
- identifying whether the occupant is a qualifying owner, tenant, permitted subtenant, family member, majority interest holder, or trust beneficiary;
- gathering the required primary-residence, entity, trust, lease, or family relationship documentation;
- locating the security code or PIN included in the DOF notice; and
- deciding whether the appropriate path is a DOF exemption application, a Tax Commission value challenge, or another response strategy.
Although DOF has extended the exemption application deadline more than once, and although litigation over the rollout remains pending, owners should not assume the process has been halted. DOF is continuing to accept and decide exemption applications, and owners should treat the October 6, 2026, deadline as live unless DOF or a court formally changes it. If you have received a notice and are unsure whether an exemption is available, Bonadio is here to help!
If you have any questions or are interested in learning more, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
