For forty years, leaving New York was a tax strategy. Starting this year, those that left become a new tax base.
For forty years, leaving New York was a tax strategy. Starting this year, those that left become a new tax base.
New York City's new surcharge on second homes, in effect since July 1, taxes residential property that is not anyone's primary residence. Houses the Department of Finance values at $5 million or more pay 0.8% to 1.3% of value a year. Condos and co-ops it values at $1 million or more pay 4% to 6.5% of value a year, and that is not a typo; the city values apartments off rental income, far below sale price, and set the rates to match. A condo the Department carries at $3 million owes $120,000 every year.
Why does this matter beyond the people who get the bill?
Because the exemption is a primary residence test, and the people best positioned to fail it are the ones who did everything right under the old rules. You moved to Florida. You changed the license, registered to vote, filed the declaration of domicile, kept the New York days under 183 and the New York return nonresident. Every one of those facts won the income tax audit. Every one of them now proves the apartment is not your home. The statute lets you rebut the city by showing the apartment is the address on your New York resident return, and a Florida domiciliary has no such return.
The apartment you kept for the grandchildren and the theater is the property this tax was drafted around. For a family that left to save a few hundred thousand dollars a year in income tax, a six-figure surcharge on the apartment changes the arithmetic of the move, and in some cases erases it. The residency planning industry, mine included, spent decades teaching people how to prove they left. New York has now priced that proof.
Is it going to hold?
The law is in effect and it is in court. On September 29 a Staten Island judge ruled the city's rollout violated the statute, because the Department of Finance mailed 17,000 notices before making the individualized determination the law requires. The city appealed the same evening, which stays the order automatically, and says it is proceeding. Two suits filed that week attack the statute itself as discriminating against nonresidents and as retroactive. Those arguments are serious. They are also years from a final answer, and the exemption deadline for anyone who received a notice is October 13. Bills are expected around November 15.
What should you be thinking about?
Whether a child, parent or sibling living in the apartment, or a tenant under an arm's-length lease of at least a year, can make it a primary residence. Whether the apartment is worth keeping at the new carrying cost, when every owner in your position is doing the same math at the same time. And whether this stays a New York story, because every other big city with a budget gap is watching whether New York collects.
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