New York's Pied-a-Terre Tax: Who Pays and How Much

New York City has approved a new tax on second homes that will more than double property taxes for many wealthy luxury apartment owners, according to tax experts.

State lawmakers 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 or more and is expected to generate $500 million in revenue.

How the tax will work

According to budget details obtained by CNBC, the property tax will take effect in two phases. For the 2026-2027 and 2027-2028 tax years, condos and co-ops valued at more than $1 million by the city’s Department of Finance will be subject to the tax.

Properties valued between $1 million and $3 million will face a 4% annual tax. Properties worth $3 million to $5 million will face a 5.25% tax, while those above $5 million will face a 6.5% tax.

Although the rates appear steep, experts say the city’s outdated assessment and valuation system significantly undervalues many properties, which reduces the actual burden. City valuations can often be 10% or less of true market value.

Valuations will be updated in phase two

Starting in the 2028-2029 tax year, property values will be based on comparable sales as the city gradually updates its system. Because assessed values will rise sharply, the tax rates will fall to offset the change.

After the valuation adjustment, properties worth between $5 million and $15 million will be taxed at 0.8%; properties between $15 million and $25 million at 1.05%; and properties above $25 million at 1.3%, according to the budget plan.

“It’s incredibly complicated,” said Robert Pollack, a New York property tax attorney with Marcus and Pollack LLP.

Ken Griffin becomes the face of the debate

Billionaire and Citadel CEO Ken Griffin became the public face of the tax after New York City Mayor Zohran Mamdani posted a video in front of Griffin’s penthouse announcing the policy. Griffin responded by threatening to pull back business and jobs from New York in the future.

Under the new tax, Griffin, who is a tax resident of Florida, would see his Manhattan property tax bill more than triple, according to CNBC calculations.

Griffin bought his 24,000-square-foot penthouse at 220 Central Park South in 2019 for $238 million. However, city records value the apartment at just $15.5 million. His property tax bill for the 2026-2027 tax year is $858,332.

In the first two years of the pied-a-terre tax, Griffin’s property tax bill would rise to $1.87 million, according to Pollack. Starting in the 2028-2029 tax year, it would increase to just under $4 million.

Griffin also purchased two apartments at 740 Park Ave. for a total of $83 million, according to reports. The tax on those units would be $1.1 million starting in 2028, bringing his total Manhattan property tax bill for all his properties to more than $5 million.

While city politicians say the wealthy can afford it, real estate brokers and tax attorneys warn the sticker shock will be significant.

“All my clients already feel like they pay too much,” Pollack said. “These numbers are significant. I don’t care how wealthy you are.”