The 220 Central Park South building, center, stands in New York, U.S., on Wednesday, Jan. 23, 2019. Just days after buying one of the most expensive residential properties in London, Citadel founder Ken Griffin set a U.S. record with the $238 million penthouse at 220 Central Park South.

Jeenah Moon | Bloomberg | Getty Images

New York City's new tax on second homes will more than double property taxes owed by many wealthy luxury apartment owners, according to tax experts.

State lawmakers on Wednesday passed the tax on nonprimary residences in order to help close the city's budget gap. The so-called pied-a-terre tax will be imposed on second homes valued at $1 million or more. It's expected to raise $500 million in revenue.

Details on the tax obtained by CNBC show that the property tax would take effect in two different phases. In the first two years – the tax years 2026-2027 and 2027-2028 – condos and co-ops valued at more than $1 million by the city's Department of Finance will be subject to the tax. Properties worth between $1 million and $3 million will face a 4% annual tax; properties valued at $3 million to $5 million will face a 5.25% tax; and those above $5 million will face a 6.5% tax.

While the tax seems large, experts say the city's antiquated assessment and valuation system dramatically undervalues properties, reducing the burden. City valuations can often be 10% or less of the true market value, they said.

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Rather than overhaul the system immediately, the city will gradually update valuations – and the tax – according to the budget documents. Starting in the 2028-2029 tax year, the property values will be based on comparable sales. Since valuations will skyrocket, the tax rates will fall to compensate.

After the valuation adjustments, properties worth between $5 million and $15 million will be subject to a tax rate of 0.8%; properties between $15 million and $25 million will be taxed at 1.05%; and properties over $25 million will be taxed at 1.3%, according to the budget plan.

"It's incredibly complicated," said Robert Pollack, a New York property tax attorney with Marcus and Pollack LLP.

Billionaire and Citadel CEO Ken Griffin became the face of the tax after New York City Mayor Zohran Mamdani posted a video in front of Griffin's penthouse apartment announcing the tax. Griffin fired back, threatening to pull back business and jobs from New York in the future.

Under the new tax, Griffin — who is a tax resident of Florida — would see his Manhattan property tax bill more than triple, according to CNBC calculations.

Griffin purchased his 24,000-square-foot penthouse at 220 Central Park South in 2019 for $238 million. However, according to government records, the city values the apartment at just $15.5 million. Griffin's property tax bill for the 2026-2027 tax year is $858,332, according to city records.

In the first two years of the pied-a-terre tax, Griffin's property tax bill would more than double to $1.87 million, according to Pollack. Starting in the 2028-2029 tax year, it would increase to just under $4 million.

Griffin also purchased two apartments at 740 Park Ave. for a total of $83 million, according to reports. The tax on those units would be $1.1 million starting in 2028, bringing his total Manhattan property tax bill for all his properties to more than $5 million.

While the city's politicians say the wealthy can afford it, real estate brokers and tax attorneys say the sticker shock will be significant.

"All my clients already feel like they pay too much," Pollack said. "These numbers are significant. I don't care how wealthy you are."