New York City's looming tax on luxury second homes has left thousands of property owners in a fog of confusion. Lawyers, accountants, city officials -- and The Wall Street Journal -- are wading through myriad questions about the tax and the rollout so far. We answered some of them.

Who exactly is subject to this tax?

The tax applies to homes in New York City that are worth $5 million or more and don't serve as the owner's primary residence. There are a few exemptions, such as if an immediate family member is living in the home or if it is rented out long-term.

Only one property can be considered someone's primary residence. If someone is a primary resident of New York City but owns multiple homes there, the tax would apply to the non-primary residences worth $5 million or more.

Wait, you just said the pied-à-terre has to be worth $5 million or more. Why are condos and co-ops that the city values at $1 million or more also taxed?

The discrepancy arises from the notoriously byzantine nature of New York City's property tax system. A decades-old state law requires the Department of Finance to value condos and co-ops as if they were rental apartment buildings. In many cases, that leads the department to value condos and co-ops well below what they might actually sell for because the typical rental unit is generally worth less than a condo or co-op.

Because of this mismatch, the city estimates that condos and co-ops valued by the Department of Finance at $1 million will translate to a real-life value of $5 million.

The math is more straightforward for one to three-family townhomes. In those cases, the Department of Finance can use the typical strategy to judge the home's value by looking at the sales of comparable properties.

What's with this two-phase tax rollout?

The city is well aware that the property assessment system described above is painfully cumbersome. It is using the pied-à-terre tax as an opportunity to fix it.

During these first two years of the tax rollout, the Department of Finance is in charge of coming up with a new formula to assess condos and co-ops that more closely aligns with their actual value.

Starting in July 2028, the Department of Finance will use a uniform system to value these properties. Under that standardized process, all pied-à-terre properties will be subject to the same $5 million value threshold and tax rates.

Governor Kathy Hochul estimated earlier this year that 10,000 properties would be subject to the tax. So why did Mamdani send out warning notices to 17,000 homeowners instead? And what about that bigger list of 960,000 properties?

Treat that list of 960,000 properties as a rough starting point for the pied-à-terre tax pool, not the final list of who owes the tax. The Department of Finance included properties on that list that might be subject to the tax with the caveat that "the vast majority" wouldn't be. Only the 17,000 homeowners who received warning notices are required to take any action.

Even the list of 17,000 homeowners who received letters is larger than who will ultimately pay the tax. The Department of Finance deliberately cast a wider net because it said it was sometimes unable to confirm whether a home was being used as a primary residence.

That is why some New Yorkers who have called the city home for years, or even decades, may have received a "You may be subject to..." tax notice. Property owners have until Sept. 18 to challenge the tax or apply for an exemption. As of last week, around 7,000 homeowners were in some stage of filing an appeal. The city has to finalize the list by the end of the year.

A judge temporarily blocked the tax this week. Mamdani is trying to reverse that block. Where does all that stand?

A state judge in Staten Island court on Monday granted an emergency pause on the tax rollout in response to a lawsuit from a group of angry homeowners. Hours later, Mamdani's office filed a notice saying it plans to appeal the decision. The city said that the filing triggers an automatic stay, effectively putting the Staten Island court order on ice until a higher court issues a judgment on the appeal.

Meanwhile, the mayor's office said it plans to continue with the pied-à-terre tax implementation. Randy Mastro, a lawyer for the plaintiffs, filed a letter on Tuesday contesting the automatic stay and maintaining that the court's emergency pause is still in effect.

The next hearing is scheduled for August 31. That is when the court will hear arguments on the lawsuit and whether to extend the temporary pause. The plaintiffs ultimately want the court to force the city to restart the tax implementation process.

President Trump says he wants to stop this tax. Can he?

It is unclear what kinds of federal levers Trump could pull to intervene in a state tax law. The constitution limits the president from unilaterally interfering with local laws. Some lawyers speculate that Trump could use other leverage such as withholding federal funding or having the Justice Department investigate the constitutionality of the tax.

When is this tax actually due?

Pied-à-terre taxpayers owe their first payment on Jan. 1, 2027.

Can I get an exemption if I start renting out my New York City pied-à-terre now?

Not this year. The Department of Finance is applying the tax retroactively based on how the property was used on Jan. 5 of this year. Changing the use of a pied-à-terre to get an exemption -- such as by renting it out or having an immediate family member live there -- will apply next fiscal year, at the earliest.

Mamdani campaigned on tax hikes for corporations and the wealthy. Why did he go with this tax instead?

Those tax proposals were expected to generate around $9 billion a year, but they got little traction with Gov. Hochul, who must approve tax reforms. She said it would scare away high-income earners and businesses from the city.

The pied-à-terre tax, estimated to bring in around $500 million, became the happy medium. It satisfied Mamdani's "tax-the-rich" pledge and was more palatable in Albany.

This explanatory article may be periodically updated.