New York passes a pied-a-terre tax: who pays and at what rate

New York City’s new tax on so-called second homes will significantly raise property taxes for many wealthy owners of luxury apartments, tax experts say. The new levy is expected to help fill the city’s budget gap.

State lawmakers have passed the tax on nonprimary residences. The so-called “pied-a-terre tax” will be imposed on second homes valued at $1 million or more and is expected to raise $500 million in revenue.

Phased rollout: 2026-2027/2027-2028 through 2028-2029

According to tax details obtained by CNBC, the property tax will take effect in two phases. The first phase covers the 2026-2027 and 2027-2028 tax years. It applies to condos and co-ops valued at more than $1 million by the city’s finance and tax departments.

In the first phase, tax rates are set by valuation tier: properties worth $1 million to $3 million will face a 4% annual rate; $3 million to $5 million, 5.25%; and above $5 million, 6.5%.

Although the nominal rates look high, experts note that the city’s outdated assessment and valuation system may substantially understate property values, lowering the actual tax burden. The claim is that city valuations can sometimes be just 10% or less of true market value.

The city will not overhaul its assessment system all at once; instead, it will update valuations and taxes gradually according to budget documents. Starting in the 2028-2029 tax year, valuations will be based on comparable sales. Because valuations will rise, the tax rates will be lowered accordingly.

After the valuation changes, the budget plan sets tax tiers at 0.8% for properties worth $5 million to $15 million; 1.05% for $15 million to $25 million; and 1.3% for properties above $25 million.

Valuation updates and lower rates: why the nominal rate can be high while the real burden is lower

Real estate tax lawyer Robert Pollack of Marcus and Pollack LLP said, “It’s incredibly complicated.” The key point is that the early phase uses a more conservative assessment standard, while the later phase switches to a sales-based valuation method, with lower tax rates offsetting higher valuations.

Who may be the key target: Ken Griffin’s Manhattan tax estimate

Billionaire and Citadel CEO Ken Griffin became the face of the issue after New York City Mayor Zohran Mamdani posted a video on the wealth tax topic. Griffin later responded by threatening to withdraw business and jobs from New York in the future.

According to CNBC’s calculations, if the new tax were applied to Griffin’s situation, his Manhattan property tax bill would more than triple because he is a Florida tax resident.

Griffin bought a 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 only $15.5 million. Under city records, his property tax bill for the 2026-2027 tax year is $858,332.

In the first two years of the pied-a-terre tax, Pollack estimated Griffin’s bill would more than double to about $1.87 million. Starting in the 2028-2029 tax year, it is expected to rise to just under $4 million.

The report also notes that Griffin bought two apartments at 740 Park Ave. for a total of about $83 million. Property taxes on those units are expected to be $1.1 million starting in 2028, bringing his total Manhattan property tax bill to more than $5 million.

Concerns over a heavier burden: tax shock and debates over the assessment system

Although city officials say the wealthy can afford the tax, real estate brokers and tax lawyers say the sticker shock will be substantial.

Pollack said, “All my clients already feel like they pay too much tax. The numbers matter. No matter how wealthy you are.”