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To paraphrase Benjamin Franklin, there is nothing assured in life, except death and taxes. In New York City, property taxes represented 42% of all taxes collected for fiscal 2015, which ended June 30, 2015. The majority, 29.5% of all city taxes were for uniform agencies (police, sanitation, corrections), with 27.5% for education, 24% for other agencies (e.g. transportation, housing, parks), and 19% for health and welfare.
It might be little consolation that the city’s property taxes are generally lower than the surrounding suburbs, which are relied on primarily to fund education. However, at least we can illuminate the process
Image by Kristie Tuthill / Flickr
The city’s Department of Finance values, or assesses, your property annually. Each January, the department mails a Notice of Property Value, outlining the property’s market and assessed value. The property tax rate is applied to your assessed value in order to calculate the year’s property taxes. As a homeowner, if you disagree with your assessed value, you can challenge it by appealing to the NYC Tax Commission.
There are two classes of residential property for property tax purposes. Class 1 covers between a one and three family homes, while Class 2 is for co-ops, condos, and rental units with more than four units.
The property taxes for a Class 1 property is comprised of four steps. The city will determine the market value by comparing prices of similar properties that sold in your neighborhood over the past three years. Assessed value is determined by taking the market value and multiplying it by the level of assessment (currently 6%). Exemptions, or reductions, are subtracted from this figure to figure the taxable value. There are a number of exemptions, such as those based on income, age, and disability. Your property tax bill is the taxable value times the tax rate (currently 19.554%), minus any abatements.
For a Class 2 property, it is a bit more complex, with five steps. The first one is to determine the market value, which is generally based on income earnings potential. Next, an assessed value is obtained by multiplying the market value by 45.63%. Step three applies only for properties with 11 units or more and the next step are for exemptions, which are reductions in the assessed value. This taxable value is multiplied by the tax rate (12.883%), subtracting any abatements (reductions to the tax), to determine your property tax.
Property taxes have been rising annually due to higher assessments. Generally, the rate of increase has been in the mid-to-high single digit range.
Process for payment
There are two ways to pay your property tax bill. If you have a mortgage, you can pay your taxes with your monthly payment, along with principal and interest on your loan. The other way is to pay the amount due on your own. If your property’s assessed value is less than $250,000, bills are mailed quarterly and due January 1st, April 1st, July 1st, and October 1st, while it is semi-annually if the amount is greater than $250,000.
The news about property taxes is not all glum. If your itemized deductions are high enough to offset the standard deduction, the payment can be deducted from your federal income taxes. This lowers the amount you actually pay, with the benefit generally increasing for those in higher tax brackets.