New York State Real Estate Annual Surcharge

One-to-Three Family homes valued at over $5 million and condominiums and co-ops valued over $1 million do not fall under an exemption and are subject to the surcharge. Values have been set following supplemental property assessments by the DOF, published on July 24, 2026. By way of illustration, if the PAT applies to your property, the tax assessed will be $40,000 per year for the first two years ($1,000,000 x 4% for condominiums and co-ops, $5,000,000 x 0.8% for one-, two- and three-family homes).

The New York City Department of Finance (“DOF”) notified property owners impacted by the PAT via mail at the end of July. These initial letters were based on 2024 income tax data. The DOF is sending out additional letters in late August and early September indicating some properties are no longer identified as being subject to the PAT and some properties are now identified as being subject to the PAT based on newly received 2025 income tax data. Property owners who received an initial surcharge notice or a secondary surcharge notice and believe they qualify for an exemption will need to file a surcharge exemption with the DOF by October 6, 2026, via the exemption form on the DOF website. [3]

Property owners who received PAT notices and do not fall under the exemptions but believe that their property value has been incorrectly assessed may appeal through a separate process with the New York City Tax Commission (“Tax Commission”). For properties falling under Tax Class One (which includes one- to three- family homes), the deadline to file an appeal is March 15, 2027. For properties falling under Tax Class Two (which includes condominiums and co-ops), the deadline to file an appeal is March 1, 2027. More information about the appeal process and what documentation needs to be filed can be found on the Tax Commission website.[4]

Property owners and those wishing to invest in real property in New York City should consider the implications of the PAT and what impact it may have. Those who have avoided making the city their primary residence may no longer enjoy the benefits of having an expensive secondary home in New York City without paying a substantial annual tax. This will impact anyone trying to sell a pied-a-terre and also impact the number of individuals wishing to invest in property in the city. The PAT also may impact co-ops and condominium boards, who should review how the PAT can affect the marketability of vacant units in these buildings. While the PAT is anticipated to generate enough revenue to aid in closing the budget gap for the city, there may be long-term impacts on the real estate sector.

The rollout of the PAT was initially paused pursuant to temporary restraining order issued by the State Supreme Court on Staten Island.[5] However, the New York City Law Department has an appeal pending, deferring the temporary restraining order, which means the PAT is not dead just yet.[6] President Trump has also weighed in in opposition of the PAT, but it is not immediately obvious how the role of the federal government will impact the rollout of the PAT.

The law is rapidly shifting as lawsuits emerge, and the City is expected to be aggressive in implementing and upholding the PAT. If you received a surcharge notice in the mail or have questions about the exemption or appeal process, or if you have any general questions about the PAT, please reach out to our firm prior to the deadline to discuss your options. You can contact Steven A. Felsenthal at sfelsenthal@raineslaw.com, Mary Willis White at mwwhite@raineslaw.com, Jian C. Manganti at jmanganti@raineslaw.com, or Katherine L. Birchok at kbirchok@raineslaw.com.