New York lawmakers approve second-home tax in state Budget

[NEW YORK] 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. 

The so-called pied-a-terre tax is expected to take effect on Jul 1 this year, based on a draft legislation filed on Tuesday (May 26). The goal is to generate US$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 US$5 million or more will pay tax rates from 0.8 to 1.3 per cent.

Coops and condominiums worth US$1 million or more, which comprise the majority of properties subject to the tax, will pay rates of 4 to 6.5 per cent.

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 Jul 1, 2028, all single family homes, coops and condos worth US$5 million or more, as determined under the new valuation system, would have to pay the same tax rates. 

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

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, said the Bill. Homes occupied by immediate family members and those that are leased out as rental units are also excluded, the legislation said. 

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

Hochul and lawmakers are finalising a US$268 billion spending plan nearly two months after the Apr 1 deadline. 

Another potential tax on all-cash residential real estate purchases, which New York City Mayor Zohran Mamdani advocated for in recent weeks, was not included in the Budget package. BLOOMBERG