New York has a reputation for being a high-tax city, but when it comes to property taxes, the reality is far less than expected. Property tax rates in New York City are actually rather modest and differ substantially between the city of New York and the rest of the state. The average effective property tax rate in New York City is 0.88%, which is more than half the statewide average of 1.69%.
In fact, several counties in New York (outside of New York City) have rates that surpass 2.5%, which is more than double the national average of 1.07%. However, those low rates do not always imply that city residents pay less than those in other regions of the state.
Here’s a comprehensive guide to New York City property taxes, as well as further information on property tax exemptions:
Property Taxes in New York City
In New York State, tax rates are based on the assessed value of your house. On your real estate tax bill, you will see a variety of different rates, including rates for your county, city, and school district. There may be additional special rates for tax districts in some places to support services or projects such as libraries and parks.
Each year, rates are revised based on the total value of the real estate in a tax district (the tax base) and the amount of income required by the tax authority. Property tax increases in most districts are limited to 2% or the rate of inflation, and rates don’t vary significantly from year to year. However, that cap can be overcome by a 60% majority of a local government board or district voters.
During the course of the year, the majority of New Yorkers will get two property tax bills. After evaluations are completed, the first will come in September. This is the tax bill for schools and, in some cases, public libraries. The second is scheduled to arrive in January of the following year and is designated for county and municipal taxes. It may also apply to other special district levies.
The typical ETR for condos and co-ops is 1.02%, resulting in a tax bill of $9,180 for a $900,000 unit. At the top of the distribution, 5% of all units pay ETRs greater than 1.2%, or $10,890 in taxes for a $900,000 apartment. As with modest residences, some co-ops and condominiums have ETRs close to 0%, resulting in a very cheap tax burden.
Due to Manhattan’s high real estate values, the average homeowner pays $8,980 in annual property taxes, whereas the statewide median payment is $5,732.
Did you know that selling a house in NY with a tax lien is possible? If you are still new to the property market, Leave The Key Homebuyers can help you understand tax liens as well as closing costs when selling a house.
New York Property Tax Exemptions
Despite the fact that all property is assessed, not all of it is taxable. Some properties, such as those held by religious groups or governments, are excluded from property taxes entirely. Others are exempt in part, such as veterans who qualify for a partial exemption on a portion of their house and homeowners who qualify for the School Tax Relief (STAR) program.
The majority of exemptions are granted at the discretion of the taxing jurisdiction (municipality, county, or school district). Check with your assessor to see whether your town has any exemptions. Let’s have a look at the three common property tax exemptions in New York.
Homestead Exemption
Since New York allows filers to use either the federal exemption system or the state exemption system, you’ll have two homestead amounts to select from. However, you cannot combine exemptions from both lists, so choose the approach that will safeguard your most valuable assets.
The homestead exemption in New York pertains to real property, which includes your house, condominium, or co-op. It is also applicable to a mobile home.
If you own property under tenancy by the entirety with your spouse, the bankruptcy trustee may be barred from utilizing the property equity to pay off debts if only one spouse files for bankruptcy (rather than both). However, this is a difficult issue. Before filing for bankruptcy, consult with a local bankruptcy professional to ensure that you do not lose the important property.
Property Tax Exemptions for Seniors and Disabled Individuals
In New York State, local governments and school districts can choose to reduce the amount of property taxes paid by qualified older and disabled residents.
Seniors must be 65 years or older to qualify, as well as fulfill certain income limits and other restrictions. The statute permits each town, county, school district, city, or village to ascertain the maximum wage ceiling for the 50% exemption at any amount between $3,000 and $29,000 of the qualified handicapped or senior person’s lawful dwelling. In New York City (NYC), the maximum allowable income for homes is $50,000.
Those with disabilities must have particular documentation of their disability, as well as fulfill certain income limits and other conditions, in order to qualify.
Localities may also grant exemptions of less than 50% to those with qualifying impairments who earn more than $29,000 per year. Under this option, known as the “sliding-scale” option, an eligible owner can have a yearly income as high as $37,399.99 and receive a 5% exemption in regions where the maximum amount is used.
Property Tax Exemption for Disabled Veterans
Veterans who have served in the United States Armed Forces, including the Navy, Army, Air Force, Coast Guard, and Marines are eligible for three types of property tax exemptions.
It is not automatic to obtain a veterans exemption; if you are a qualified veteran, you must complete and return the first exemption application form to your assessor. Most municipalities have a March 1 deadline.
You must include one of the following attachments with your application:
- A letter from the New York State Division of Veterans’ Services (DVS) certifying that you now fulfill the character of discharge standards for all benefits and services outlined in the Restoration of Honor Act
- Proof of honorable discharge or release from duty (typically Form DD-214
- If not already included on the documents indicated above, you must also submit verification of the hours and locations served in active service.
Constitutional Standards of New York Property Tax
The New York State Constitution restricts the jurisdiction of cities, counties, and municipalities to levy property taxes. Statutes enacted to execute these constitutional standards require the Comptroller to withhold some local aid payments if taxes exceed a municipality’s tax cap.
In New York State, real property taxes are the single greatest source of revenue for municipal
governments. Property taxes are utilized to offset the shortfall between appropriations and expected non-property tax receipts in the conventional budget procedure.
The Constitutional tax limit is the maximum amount of real estate tax that can be charged in each fiscal year. It is calculated by multiplying the value of taxable real estate by a percentage specified in the Constitution. The most difficult component of the procedure is assessing whether or not the tax levy needed by a yearly budget remains within the limit.
The Constitutional tax limit ought not to be confused with the Tax Cap, which is another tax levy regulation. The Tax Cap, enacted by the State legislature in 2011, compels all local governments and school districts, with the exception of New York City and the “Big Five” dependent city school districts, to file separately.
Growing municipal budgets and declining non-property tax income streams in the current fiscal situation create pressure to raise property taxes, expanding a higher share of the Constitutional Tax Cap. Simultaneously, if property values fall overall, the tax cap will fall as well.
Endnote
The substantial disparity in effective tax rates paid by different property types is the byproduct of policy decisions made by state elected and local officials. Owners of modest residential properties are shielded from tax hikes at the expense of owners of large and commercial rental buildings.
Levels of inequality in New York City are substantially greater than in other cities, boosting the cost of commercial space and rental units and undermining the city’s economic competitiveness. Government attempts to shield some types of owners from major tax increases due to property value appreciation explain the wide disparities in ETRs between properties of the same kind.
Regrettably, these generally unanticipated outcomes create significant inequalities among otherwise similarly positioned New York residential and commercial property owners.
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