Property tax accounted for 48% of all municipal tax dollars received in New York City in the fiscal year 2021. As a homeowner, you may feel intimidated by the procedures involved in purchasing or selling a property. Hidden fees, appraisals, mortgage contingencies, inspections, and closing costs when selling a house are just a few examples.
According to the non-profit Tax Foundation, New York State property taxes are among the highest in the country. The state technically does not levy a property tax and does not benefit from tax revenues, as they are assessed by local governments, county governments (county tax), and school districts (school tax).
The state code does provide tax exemptions for people who use their homes as their primary residence, as well as veterans, senior citizens, and people with disabilities.
This article will teach you all you need to know about New York property taxes, including what they cover and the penalties for failing to pay them.
Property Taxes in New York
Property tax is a system in which property and building owners are required to pay a sum of money depending on the worth of their land and real estate structures.
Real estate taxes differ across the United States. For example, your property taxes (specifically, property tax rates) in New York will differ from those in another state.
Property tax funds support municipal services, schools, road maintenance, health and welfare, police and fire departments, and other agencies such as parks, housing, and transportation. These taxes are the primary sources of revenue for school districts and municipal services.
While federal tax rates are the same regardless of filing status, state taxes can vary greatly. Individuals who own property may be liable to state property taxes in addition to state income taxes.
New York Property Tax Laws
The city determines each property’s market worth and bases tax responsibilities on the assessor’s value that is a percentage of the market value. Each type of property has its own set of assessment rules. The increase in assessed value is limited by limitations or phase-ins.
The assessed value increase rate from one year to the next or over five years is restricted for small residences and flats in small buildings. While this protects owners from quickly rising costs, the less obvious effect is that it lowers the effective tax rate (ETR) for properties in communities with growing property values, while maintaining it high for homes in regions with stable or dropping values. If market prices rise faster than the five-year cap, the properties’ ETRs will fall over time.
Larger residential buildings and commercial properties do not have assessed value growth restrictions, but the rise in value in a particular year is phased in equal parts over five years.
Typically, the impact over numerous years is less than that of a cap, but it does contribute to developing disparities. These provisions have the secondary effect of imposing higher ETRs on units in neighborhoods with stable or declining values while significantly lowering ETRs on units in neighborhoods with soaring values, with the most stunning favorable impact on those who benefit the most from property appreciation.
The majority of the difference in ETR across properties of the same kind is due to numerous exemption programs with particular eligibility requirements and benefit levels. Individual or personal exemptions reduce taxes on residential owner-occupied homes based on the owner’s income, disability, residence, or age.
Buildings are granted exemptions for housing and economic development in order to stimulate economic activity and construction (or renovation). Housing development exemptions are available for both renter and owner-occupied residential developments.
How to Pay Property Taxes in New York
You have alternatives for paying your property taxes, albeit the particular options are determined at the municipal level. Property taxes can be paid as part of your monthly mortgage payment or in semi-annual or annual installments payable straight to your municipal tax authority.
Property tax bills are issued quarterly for residences worth less than $250,000 and biannually for homes worth more than $250,000. Quarterly bills are payable on January 1, April 1, July 1, and October 1 with your bill being mailed about a month before the due date.
Semiannual bills are mailed one month before the due dates of January 1 and July 1. When you receive your bill, thoroughly analyze it to ensure that you understand not just how much you owe, but also where that figure came from. Find out more at www.nyc.gov/finance, where you can also examine your property tax information statement at any time.
- How to Pay: Read the directions on your bill or go to www.nyc.gov/payonline to know about your payment choices, which include postal mail, electronic, and in-person payments.
- Mortgage Servicing Companies and Banks: If you pay your property taxes through a mortgage servicing firm or bank, you will not get a property tax statement from the Department of Finance unless you are responsible for additional expenses such as emergency repairs and sidewalk.
What Do Property Taxes Cover?
The property tax in New York State is a local tax that is earned and spent locally to fund local governments and public schools. While the State does not collect or get any direct benefit from the property tax, it is nonetheless very important as the single greatest source of money for municipality and school district services. Counties, towns, cities, villages, special districts, and school districts, use property taxes to fund:
- Police and fire protection
- Schools
- Health and welfare
- Road maintenance
- Parks
- Housing
- Transportation
- And many other municipal services
Do You Have to Pay New York Property Taxes?
If you own property as an individual or a business, you must pay property tax on it. Even if the property was given to you as part of a family home or if you own a rental property, you are considered a taxpayer..
In New York, there is no minimum or maximum amount you must pay in property taxes. Whether you own a $10,000 or a $10,000,000 home, you must pay property taxes.
If you bought your home in the middle of the year, your realtor may be able to arrange for you and the seller to share the expense of property taxes for the remainder of the calendar year. If this is the scenario, it will be reflected on your mortgage interest statement.
Fines for Not Paying Property Taxes in New York
Failure to uphold property tax payments on time may result in a tax foreclosure. Here’s how a tax foreclosure in New York works: When you fail to pay your taxes, the overdue amount, which includes the outstanding taxes, penalties, interest, and charges, becomes a lien on your house.
A “lien” is a legally binding claim made upon your property. The taxation authorities might then foreclose the lien in order to recover the unpaid sums. (In New York, a few places offer tax lien certificates, which means they sell the lien that exists on the home rather than foreclosing to pay the delinquent taxes.)
- Interest
According to Real Property Tax Services Law § 924-a, the interest rate on late property tax payments is (1%) every month or portion thereof. This rate has been constant since it was implemented in 1983. Interest rates in areas not subject to RPTL § 924-a may vary.
- Penalties levied on late payments
A municipality may not waive penalties on school tax or real estate payments received beyond the due date for any reason under New York state law.
- Without penalty, the first half of school taxes are payable by September 30th.
- Without penalty, the second half of school taxes are payable by January 31st.
- Without penalty, town taxes (one installment) are payable by April 30th.
School Tax Payments
Source: Mount Pleasant
Town and County Tax Penalty
Source: Mount Pleasant
Endnote
The significant difference in effective tax rates paid by various types of properties is the result of policy decisions made by local and state elected officials: owners of modest residential properties are shielded from increased taxes at the expense of owners of commercial and big rental buildings.
The extent of the inequalities in New York City is significantly bigger than in other cities, raising the cost of rental housing and commercial space and hampering the city’s economic competitiveness.
Furthermore, governmental efforts to insulate some categories of owners from significant rises in taxes owing to property value appreciation explain the vast variances in ETRs across properties of the same type. Unfortunately, these mostly unexpected outcomes generate major imbalances among otherwise similarly positioned residential and commercial property owners in New York.
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