New York lawmakers approve second-home tax in state budget

New York lawmakers approved a revenue package for the state budget that includes a new surcharge on pricey second homes in the city, but omits a proposal to tax all-cash property purchases. 

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The so-called pied-à-terre tax is expected to take effect July 1 this year, according to draft legislation filed Tuesday. The goal is to generate $500 million to help close New York City’s budget hole. Governor Kathy Hochul’s office estimates the charge would affect roughly 10,000 single family homes, coops and condominiums citywide. 

The state legislature voted to approve the measure on Wednesday.

The new tax will be levied in two phases. In the first two years, single family homes with market values of $5 million or more will pay tax rates from 0.8% to 1.3%, while coops and condominiums worth $1 million or more, which comprise the majority of properties subject to the tax, will pay rates of 4% to 6.5%.

During that period, the New York City Department of Finance is expected to develop a new system for determining the market value of coops and condos. After July 1, 2028 all single family homes, coops and condos worth $5 million or more, as determined under the new valuation system, would pay the same tax rates. 

Those worth $5 million to $15 million would pay a rate of 0.8%; such homes worth $15 million to $25 million would pay a 1.05% rate, and homes worth $25 million or more would pay a rate of 1.3%. 

Property owners subject to the tax will be notified by Aug. 30. They will then have an opportunity to contest their inclusion. 

Some properties would be exempt from the levy, including those owned by New Yorkers who live primarily in the city, according to the bill. Homes occupied by immediate family members and those that are leased out as rental units are also excluded, the legislation says. 

The new tax’s structure and implementation, which were the subject of weeks of internal debate, are similar to details reported earlier this month. 

Hochul and lawmakers are finalizing a $268 billion spending plan nearly two months after the April 1 deadline. 

Another potential tax on all-cash residential real estate purchases, which New York City Mayor Zohran Mamdani advocated for in recent weeks, wasn’t included in the budget package.