As New York City rolls out a new tax on pricey second homes, the state will be watching for evidence of potential tax fraud by owners who claim they mostly live elsewhere — thereby avoiding local or state income taxes or higher car insurance premiums — but actually spend most of their time in the city.
A spokesperson for Gov. Kathy Hochul, who partnered with Mayor Zohran Mamdani to enact the pied-à-terre tax this year, told The City Reporter on Wednesday that her office is actively looking into any such cases revealed through the exemption process for the new surcharge — though it’s not immediately clear if the state will staff up for these audits.
In effect, the pied-à-terre tax could expose local residents who try to reduce the income taxes they owe by declaring homes outside of the city — in places where those taxes are lower — as their primary residences. The scope of the problem is murky, but city and state officials have long sought to combat residency fraud and collect legally owed levies.
“Hard-working New Yorkers pay taxes that fund our schools, roads, transit and public safety,” Hochul spokesperson Jen Goodman told The City Reporter in a statement. “The pied-à-terre tax was designed to ensure people who can afford luxury second homes, but don’t pay New York income taxes, are still contributing to the city they benefit from. If you’ve been falsely claiming to be a non-resident in order to cheat the system, it’s time to come clean — or our Department of Taxation and Finance will take action to ensure you pay your fair share.”
Mamdani and Hochul have estimated the second-home tax could generate up to $500 million annually to shore up the city’s budget. After a debut that confused many residents last week, the city is determining who must pay the tax, which will appear on affected property tax bills due Jan. 1. Owners have until Sept. 18 to seek an exemption from the city’s Finance Department.
As part of the rollout, the department said it sent letters to about 17,000 homeowners notifying them their property “may be subject to the new surcharge.” In some cases, recipients told The City Reporter and other news outlets they were full-time residents and were blindsided by the letters requiring them to prove they live in the city.
The tax covers one-, two- and three-family homes assessed by the city to be worth at least $5 million, as well as condo and coop units assessed to be worth at least $1 million. There are exemptions for non-owner-occupied properties occupied by a tenant, someone who collectively holds a majority interest in a corporate entity that owns a property, an owner’s immediate family member or a trust beneficiary.
As of Wednesday, about 2,600 people had submitted exemption applications to the city, according to NY1.
“The point of this is to make sure that only secondary homes of non-resident New Yorkers that are worth more than $5 million are the ones that are being subject to this tax,” Mamdani said at a press conference Wednesday. “I know there are some New Yorkers who bought their home and put it in a trust, others who bought their home and put it into an LLC [limited liability company], and therefore the city just wants to make sure that this is a primary residence holder.”
Related
