The New York State Legislature recently enacted the Pied‑à‑Terre Tax (PAT) Surcharge, introducing a significant, additional annual real estate tax on certain high-value New York City residential properties that are not the owner’s primary residence – including single family residences, condominium units and cooperative units. The PAT Surcharge was enacted by the Legislature as part of the 2026-2027 New York State Budget Bill and added Sections 1350 to 1356 to Article 30-C of the New York State Tax Law entitled “City Surcharge on Property That Does Not Serve as a Primary Residence.”
The PAT Surcharge is currently effective for fiscal years beginning on or after July 1, 2026, and ending on or before July 1, 2028.
There are two phases to the implementation and administration of the PAT Surcharge. The first phase covers the period from July 1, 2026 through June 30, 2028, and provides for tiered rates of taxation based on the type and value of the property, with surcharge rates ranging between 0.80% and 6.50%. The second phase covers fiscal years beginning on or after July 1, 2028 and expands the PAT Surcharge to all condominiums, cooperative units, and one to three-family homes valued at $5,000,000 or more.
The PAT Surcharge will be added to the tax bill and account of the property owner by the New York City Department of Finance and shall be due and payable on the same date when the second semi-annual installment of real estate taxes are due. Owners of impacted properties may seek administrative and judicial review of the imposition of the PAT Surcharge pursuant to administrative code, such review being the owner’s exclusive remedy.
Pursuant to Section 1352 of Article 30-C, the Department of Finance shall annually determine whether or not a property is a primary residence, and shall provide an initial notice of determination to affected property owners no later than August 30, 2026. The Department of Finance determines whether a property is a primary residence based on how it is occupied and who is living there. Generally, a home qualifies as a primary residence if it is occupied for more than half the year by the owner (or an immediate family member) or by a tenant under a legitimate lease of at least one year, as of January 5th of the previous year. The New York City Department of Finance determines annually whether a property meets this standard, using available records, such as tax filings or other residency indicators, and may require the owner to provide proof.
For owners and prospective purchasers of high-value New York City residential properties, the PAT Surcharge creates an important new consideration that may materially affect the cost and expense of both initial acquisition and long-term ownership.
Farrell Fritz will continue to track any developments to this legislation and will remain available to assist clients in evaluating the potential impact of the law and addressing any compliance or planning considerations that may arise.
Thank you to Summer Associate Kristina Parkas for her assistance with this post.
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