Everything you need to know about NYC Real Estate Taxes
A large portion of New York City’s tax revenue comes from high assessed property values, among the most costly in the country. Even though the city has a system, real estate taxes can be difficult to calculate.
To help you prepare for property assessments and difficulties as the New Year approaches, we’re going over the city’s assessment method and a few basics to remember.
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Real Estate Taxes in New York City
Annual real estate tax assessments in New York City are based on the property’s usage and condition as of January 5; a date referred to as the “taxable status date” by the city’s Department of Finance. For the following tax year, which runs from July 1 to June 30 of the next year, these preliminary assessments, also known as the assessment roll, are finalized and released on January 15.
Different terms and computations are used in this process depending on the property’s classification in the tax system.
- Class 1 is reserved for properties with one to three-family housing units.
- A residential property with four or more family dwelling units falls under Class 2.
- Class 3 includes all types of utility features.
- Real estate that is not included in the other classes, such as unoccupied land, hotels, and commercial and industrial structures, is included in Class 4.
The cost of new construction minus depreciation can be used to estimate the value of a building
This is done by applying a capitalization rate on the net operating income, which is then used to establish the assessed value. The assessed value is equivalent to about 45% of the estimated fair market value of the property. Over the next five years, assessments for Class 2 and Class 4 properties with more than 11 units will be phased in, with just 20% of the current year’s assessed value being applied to each year. This is what we mean by a transitional assessed value.
Rather than making physical changes to the property, the full value of the improvements is applied.
As a result, there may be two evaluations. The transitional assessed value is a total of the phase-in amounts for changes in actual assessed values from the previous five years. The real assessment value, which the Department of Finance sets as a property’s value in January, is the second type of assessment. It is then computed by multiplying the lower two assessment values by a specific tax rate.