NYC Pied a Terre Tax Exemption: Trusts, LLCs, Relatives, and Legal Planning Strategies
What Is the NYC Pied a Terre Tax?
New York City’s new Non-Primary Residence Property Surcharge, commonly called the pied-à-terre tax, is an annual surcharge on certain high-value residential properties that are not used as a qualifying primary residence.
For the 2026–2027 and 2027–2028 property-tax years, the surcharge may apply to:
- One-, two-, and three-family homes valued by the New York City Department of Finance at more than $5 million; and
- Condominium and cooperative units valued by the Department of Finance at $1 million or more.
The surcharge is calculated as a percentage of the Department of Finance’s market value for the property. Current rates range from 0.8% to 1.3% for covered one-, two-, and three-family homes and from 4% to 6.5% for covered condominium and cooperative units.
The law is aimed at valuable apartments and homes that are maintained as second residences rather than serving as someone’s principal home. However, receiving a Department of Finance notice does not necessarily mean the surcharge is owed. An owner may qualify for an exemption and should submit the required application and evidence by the deadline stated in the notice.
Who Is Subject to the NYC Non-Primary Residence Surcharge?
The tax may affect:
- Owners who maintain a New York City apartment as a second home;
- Out-of-state or international owners of New York City residences;
- Owners of vacant investment properties;
- Trusts that own high-value residential property;
- LLCs, corporations, and partnerships that own residential property; and
- Owners whose tenant, relative, beneficiary, or LLC member does not satisfy the primary-residence requirements.
The City does not look only at the name on the deed. The rules also consider beneficial ownership, entity interests, family relationships, tenancy, and actual occupancy.
Who Can Claim a NYC Pied a Terre Tax Exemption?
A covered property may be exempt when it is the primary residence of:
- The individual owner;
- A tenant or subtenant;
- One or more individuals who collectively hold a majority interest in an LLC, corporation, or partnership that owns the property;
- An immediate family member of the owner or qualifying majority-interest holder; or
- The sole beneficiary or sole present beneficiaries of a trust that owns the property.
These are express exemption categories, not technical loopholes. The owner must prove that the applicable ownership, relationship, and primary-residence requirements are genuinely satisfied.
What Counts as a Primary Residence for purposes of the NYC Pied a Terre Tax Exemption?
The qualifying occupant must actually use the property as the person’s permanent home.
The strongest evidence is generally the occupant’s most recently filed federal or state personal income tax return showing the property as the permanent home address.
If a tax return is unavailable, the applicant may generally submit two or more qualifying documents, such as:
- A current driver’s license or other government-issued identification showing the address;
- A New York City voter identification card; or
- Other evidence acceptable to the Department of Finance showing occupancy and primary residence.
The final rules allow the Department to reject documents when it has credible information showing that the property is not truly the occupant’s primary home. Merely changing a mailing address or updating a driver’s license shortly before filing may therefore be insufficient.
If You Transfer Your Primary Residence to a Revocable Trust, Do You Keep the Exemption?
Generally, yes.
Transferring a qualifying primary residence into a properly drafted revocable living trust does not automatically cause the property to become subject to the pied-à-terre tax.
If the grantor or another qualifying present beneficiary continues to use the property as a primary residence, the trust may preserve the exemption. The City generally looks through the trust to determine who currently benefits from and occupies the property.
The owner should be prepared to submit:
- The relevant trust agreement;
- A trustee affidavit;
- Identification of the sole present beneficiary or beneficiaries; and
- Primary-residence evidence for each beneficiary relied upon.
The Department of Finance’s trustee affidavit expressly recognizes an exemption where one or more primary residents are the sole beneficiaries of the trust and the trust owns the property or cooperative shares. Contingent or future beneficiaries generally are not counted when determining who is the current sole beneficiary.
This means a standard revocable trust may name children as remainder beneficiaries after the owner’s death without necessarily defeating the owner’s present primary-residence exemption.
A revocable trust can preserve an existing exemption, but it cannot turn an actual vacation home into an exempt primary residence merely by changing title.
Why Use a Revocable Trust Despite the New Surcharge?
A revocable trust remains an important New York estate planning tool because it may:
- Avoid probate;
- Permit a successor trustee to manage the property during incapacity;
- Simplify estate administration;
- Preserve privacy; and
- Facilitate the transfer of real estate after death.
New Yorkers generally do not have to choose between sound estate planning and maintaining a valid primary-residence exemption.
How Can an LLC-Owned Property Qualify for the NYC Pied a Terre Tax Exemption?
A residence owned by an LLC, corporation, or partnership may qualify when one or more natural persons who collectively hold a majority interest use the property as their primary residence.
The majority-interest requirement generally means an entitlement to more than 50% of the entity’s capital or profits. Exactly 50% is not enough.
Examples include:
- One resident member owns 60%: the ownership requirement may be satisfied.
- Two resident members each own 30%: their combined 60% may qualify.
- Three resident members each own 20%: their combined 60% may qualify.
- Two resident members each own 25%: their combined 50% is not a majority.
- A resident owns 30%, while a nonresident owns 70%: the resident generally does not qualify under this category.
The final rules make clear that the members whose interests are being combined must be the members for whom the property serves as a primary residence.
An LLC applicant may need to provide:
- The operating agreement;
- A Majority Interest Affidavit;
- Records showing each qualifying member’s capital or profit interest; and
- Primary-residence documents for the resident members.
The operating agreement should accurately state the economic rights of each member. An informal understanding that someone “owns most of the LLC” may not be sufficient.
Can a Relative of the Owner or Majority LLC Member Qualify for the NYC Pied a Terre Tax Exemption?
Yes, but only certain relationships count.
For purposes of the surcharge, an immediate family member is limited to:
- A spouse;
- A parent;
- A child;
- A sibling;
- A grandparent; or
- A grandchild.
The Department of Finance affidavit lists these six relationships, and the final rules state that the statutory list is exhaustive. Aunts, uncles, nieces, nephews, cousins, in-laws, and unrelated companions do not qualify merely because they are treated as family.
For example, a condominium owned by a parent may qualify if the parent’s adult child genuinely uses the apartment as a primary residence. Similarly, a property owned by an LLC may qualify if a person holding the required majority interest has a spouse, parent, child, sibling, grandparent, or grandchild who uses it as a primary residence.
The application should include:
- Proof of the owner’s or LLC member’s qualifying ownership;
- Proof of the family relationship, such as a birth or marriage certificate or affidavit; and
- Proof that the relative actually uses the property as a primary residence.
Can an Investment Property Qualify Through a Tenant for the NYC Pied a Terre Tax Exemption?
Potentially, yes.
A covered investment property may be exempt when it is leased to a natural person who genuinely uses it as a primary residence.
For a current written lease, the owner generally should provide:
- The lease or sublease;
- An additional rental document, such as proof of rent payment, a utility bill, or renter’s insurance; and
- Primary-residence documents for the tenant.
For a month-to-month tenancy, the owner may submit a Tenant or Subtenant Affidavit together with at least two additional rental documents.
The lease must be bona fide and arm’s length. An agreement created primarily to avoid the surcharge may be rejected. An LLC or other business entity cannot itself establish primary residency because the qualifying tenant must be a natural person.
Are There Any Pied-à-Terre Tax Loopholes?
There is no reliable loophole that allows an owner to continue using a property as an occasional second home while avoiding the surcharge through paperwork alone.
The following steps generally do not create an exemption by themselves:
- Transferring the property to a revocable trust;
- Creating an LLC;
- Adding another layer of LLC ownership;
- Giving a small LLC interest to someone who lives in the property;
- Changing a mailing address without genuinely changing residency;
- Signing a sham lease; or
- Transferring title to a relative while continuing the same use and control.
There are, however, legitimate planning opportunities:
Preserve an Existing Exemption Through a Revocable Trust
A primary residence may generally be transferred to a qualifying revocable trust without losing the exemption.
Combine Resident LLC Members’ Interests
Resident members may combine their actual capital or profit interests to exceed the 50% threshold.
Permit a Qualifying Immediate Family Member to Reside There
A spouse, parent, child, sibling, grandparent, or grandchild may establish the exemption if the property is genuinely that person’s primary residence.
Enter Into a Bona Fide Rental
An investment property may qualify when leased to a natural person who uses it as a primary residence.
Challenge the Property’s Valuation
An owner may challenge whether the property meets the applicable value threshold. This is distinct from claiming a primary-residence exemption. The City advises that an owner pursuing a Tax Commission exemption review may also be required to challenge the property’s value and may not simultaneously use the Department of Finance exemption process.
How Do You Apply for the NYC Pied a Terre Tax Exemption?
An owner who receives a Department of Finance notice should submit the online exemption application and supporting evidence by the deadline stated in the notice.
For the current 2026 filing cycle, the Department extended the deadline to September 18, 2026. Future deadlines may differ.
The filing may require:
- The exemption application;
- Proof of primary residence;
- A trust agreement and trustee affidavit;
- An LLC operating agreement and Majority Interest Affidavit;
- Proof of family relationship;
- A lease or tenant affidavit; and
- Other documents requested by the Department.
The Department will issue a determination approving or denying the application. A denial may be appealed to the New York City Tax Commission.
Estate Planning Strategies for New York Property Owners to Qualify for the NYC Pied a Terre Tax Exemption
Owners of valuable New York City real estate should coordinate surcharge planning with their broader estate plans.
Before changing ownership, consider:
- Whether the property is properly funded into a revocable trust;
- Who the current trust beneficiaries are;
- Whether LLC capital and profit interests are accurately documented;
- Whether a relative’s occupancy satisfies the narrow family definition;
- Whether a bona fide rental is economically appropriate;
- Gift and estate tax consequences;
- Capital-gains and basis consequences;
- Mortgage and transfer restrictions; and
- What happens to the exemption after the owner’s death or a change in occupancy.
A transaction that reduces the surcharge but creates a larger gift-tax, capital-gains, financing, or succession problem may not be advisable.
Frequently Asked Questions about the NYC Pied a Terre Tax Exemption
Generally, no. If the qualifying present beneficiary continues using the property as a primary residence and the required trust documents are submitted, the exemption may be preserved.
No. The trust does not change the property’s actual use.
Yes. Resident members may aggregate their interests if they collectively hold more than 50% of the entity’s capital or profits.
No. A majority interest must exceed 50%.
Potentially. The LLC owner must hold the required majority interest, the child must use the property as a primary residence, and the relationship and residency must be documented.
A spouse, parent, child, sibling, grandparent, or grandchild.
Not under the immediate-family-member category merely because of that relationship.
Yes, if the tenant is a natural person, the tenancy is bona fide, and the property is the tenant’s actual primary residence.
The owner may pursue a valuation challenge through the New York City Tax Commission, subject to the applicable procedures and deadlines.
No. It means the property may be covered and the City may lack sufficient information to confirm an exemption.
The owner may appeal the determination to the New York City Tax Commission. The denial should be reviewed immediately because strict filing deadlines apply.
How RK Law PC Can Help With The NYC Pied a Terre Tax Exemption
RK Law PC advises New York property owners regarding revocable trusts, LLC ownership, real estate transfers, probate avoidance, and succession planning involving valuable New York City property.
We help clients evaluate whether they can qualify for the NYC Pied a Terre Tax Exemption. We help ensure
- A trust-owned primary residence remains exempt;
- LLC members satisfy the majority-interest test;
- A qualifying family member may establish residency;
- A bona fide tenancy may support an exemption;
- An ownership change is consistent with estate and gift tax planning; and
- Trust and LLC documents accurately reflect the intended ownership structure.
The NYC Pied a Terre Tax Exemption does not eliminate traditional estate planning opportunities, but it makes proper drafting, documentation, and coordination more important than ever.
For more information, please contact NYC Probate Litigation, Guardianship, Probate, and Estate Planning attorney Regina Kiperman:
Phone: 917-261-4514
Fax: 929-556-2089
Email: rkiperman@rklawny.com
Or visit her at:
40 Wall Street
Suite 2508
New York, NY 10005
Visit Regina on LinkedIn
Visit Regina on Facebook
This page is made available by the lawyer for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this site you understand that there is no attorney client relationship between you and the lawyer. The post should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. ATTORNEY ADVERTISING.