NYC Pied-à-Terre Tax in Divorce: Who Keeps the Apartment, and Who Pays?
New York City’s new pied-à-terre tax adds a yearly surcharge to high-value homes that are not anyone’s primary residence, and in a divorce that bill has to land on someone. If a couple owns a Manhattan apartment they use part-time — or one spouse moves out of the marital home during the case — the pied-à-terre tax can change what the property is worth to each side, who should keep it, and what the settlement needs to say.
Val Kleyman, founder of the Kleyman Law Firm, discussed the issue with The Real Deal in September 2026. This guide explains how the tax works, where it collides with a New York divorce, and how to plan for it while its future is still being decided in court.
What Is NYC’s Pied-à-Terre Tax?
It is an annual surcharge on expensive New York City homes that are not a primary residence, enacted in the 2026 state budget and effective for the city fiscal year beginning July 1, 2026. In its first phase, which covers the fiscal years beginning July 2026 and July 2027, the rates are:
| Property type | Value | Annual surcharge |
|---|---|---|
| Condo or co-op unit | $1 million to $3 million | 4% |
| Condo or co-op unit | $3 million to $5 million | 5.25% |
| Condo or co-op unit | Over $5 million | 6.5% |
| One- to three-family home | $5 million to $15 million | 0.8% |
| One- to three-family home | $15 million to $25 million | 1.05% |
| One- to three-family home | Over $25 million | 1.3% |
In the first phase, condo and co-op values come from the city’s Department of Finance figures, which are generally well below market prices; a second phase beginning July 1, 2028 changes the valuation method and rates. A home is exempt if the owner occupies it for a majority of the days in a calendar year, and there are carve-outs when an immediate family member lives there or when it is leased for at least a year to a tenant who uses it as a primary residence.
The rollout is contested. In September 2026 a Staten Island judge ordered the city to cancel the notices it had sent owners and restart its review, without ruling on whether the tax itself is lawful, and the city said it would appeal. Separate lawsuits are pending. Anyone negotiating a settlement now is planning around a tax that exists on paper but whose collection is uncertain.
Why the Pied-à-Terre Tax Changes the Math of Dividing Property
New York divides marital property through equitable distribution, and real estate is usually traded against other assets of similar value. A recurring surcharge makes a high-value second home worth less to whoever keeps it than its market price suggests.
Take a couple who own a Manhattan apartment and a Florida condo of similar value. Before the tax, one spouse could take each and call it even. “It was trading apples for apples before. Now it’s trading apples for oranges,” Kleyman told The Real Deal. The spouse who keeps the New York unit takes on a bill that can run to six figures a year; the spouse who keeps the Florida condo does not. A fair division has to account for that difference — through an offsetting payment, a different allocation of other assets, or an agreement to sell.
See our guide to how property is divided in a New York divorce for how courts value and split real estate.
Who Pays the Pied-à-Terre Tax During a Divorce?
There is no fixed rule. While a case is pending, the surcharge is a carrying cost like common charges, maintenance fees, and real estate taxes, and it is usually allocated by agreement or in a temporary order. New York divorces can take years to resolve, and the surcharge recurs every year the property qualifies, so the question of who pays it while the case is open can be worth a great deal.
The tax can also bear on support. Courts weigh the standard of living established during the marriage when setting spousal maintenance, and a spouse who wants to keep a second home may ask for support that covers its costs — while the other spouse argues the property should simply be sold.
When a Spouse Moves Out: Primary Residence Can Shift
Divorce often means one spouse leaves the marital home, and the tax turns on who actually lives in a property. A home that was a couple’s primary residence can look different on paper once the owner-spouse lives elsewhere, and the family-member carve-out that may apply while spouses are still married may not apply to a former spouse after the judgment. These questions depend on title, who lives where, and how the Department of Finance applies its rules, so they should be analyzed before anyone moves — not after a surcharge notice arrives.
Creative Solutions — and Tactics to Avoid
Some couples will look for structured alternatives. Kleyman described one scenario to The Real Deal in which spouses agree that one of them lives in the property for several years and they stay separated rather than divorced to avoid the tax. Arrangements like that carry their own legal and financial consequences and need careful drafting; a legal separation is not simply a divorce on hold.
Others will be tempted to use the tax as a weapon — leaving a property so the other spouse is stuck with the surcharge. Kleyman told The Real Deal that one client wanted to do exactly that out of spite, and that he advised against it. “Listen, this is divorce. People use all kinds of tactics,” he said. “We pulled back on that because I told them to be careful with this.” Tactics like that tend to escalate conflict and cost both sides more than the tax itself.
What Your Settlement Agreement Should Address
Because the tax is new and under legal challenge, a settlement involving a high-value New York home should spell out:
- Who keeps the property, and how its value is adjusted for any surcharge;
- Who pays the surcharge while the case is pending and after the judgment;
- What happens if the tax is struck down, delayed, or changed — including any refund or true-up between the spouses;
- Who is responsible for filing primary-residence certifications and responding to Department of Finance notices;
- Whether the property will be sold, on what timeline, and how the proceeds and any accrued surcharge are divided.
These issues come up most often in high-net-worth divorces involving multiple residences, where real estate is frequently the largest asset on the table.
Talk to a Manhattan Divorce Lawyer About Your Property
If you own a second home in New York City, or you are deciding whether to move out of the marital residence, the pied-à-terre tax is now part of the conversation. The Kleyman Law Firm represents clients in complex, high-net-worth divorces across all five boroughs from our Park Avenue office. Call (212) 401-1977 to schedule a consultation.
This article is general information, not legal advice. For advice on your situation, consult an attorney. The status of the pied-à-terre tax may change as litigation proceeds; facts are current as of October 2026.
Frequently Asked Questions
Does the NYC pied-à-terre tax apply to the marital home?
Generally not while it is someone’s primary residence. The surcharge targets high-value homes that are not a primary residence. But if the owner-spouse moves out during a divorce, or a former spouse stays on after the judgment, whether the home still qualifies for an exemption should be analyzed with counsel.
Who pays the pied-à-terre tax during a divorce?
No rule assigns it automatically. While the case is pending, the surcharge is usually treated as a carrying cost and allocated by agreement or a temporary order. A final settlement should state who pays it going forward and what happens if the tax is struck down or changed.
Is the NYC pied-à-terre tax in effect?
It was enacted in the 2026 state budget for the fiscal year beginning July 1, 2026, but collection is being litigated. In September 2026 a Staten Island judge ordered the city to restart its owner notices, and the city said it would appeal. Settlements should plan for either outcome.
Can a pied-à-terre affect alimony in New York?
It can. Courts consider the marital standard of living when setting maintenance, and a spouse who wants to keep a second home may seek support that covers its costs, including the surcharge. The other spouse may argue the property should be sold instead. The answer depends on the full financial picture.
