First-time homebuyers can easily get caught up in a whirlwind of excitement when planning their New York City purchase. Between the mortgage, closing costs, and other expenses associated with homeownership, buyers can expect to accrue plenty of monthly and yearly costs. In addition to paying for homeowners’ insurance and utilities, NYC property owners should also calculate an estimated amount for property taxes.
What are Property Taxes?
Property tax is a real estate tax that a homeowner’s city or town assesses. Homeowners are responsible for paying their property taxes. In NYC, the Department of Finance calculates and collects property taxes for city residents. Owners of all properties, including businesses, investment properties, and residential homes, bear the responsibility of paying property taxes, although the amount can differ depending on the type of property and neighborhood. Generally, tax calculations use a specific percentage or rate multiplied by the assessed value of the land and property.
Like many cities in the U.S., NYC property tax funds help maintain and provide municipal services. They may fund law enforcement, education, and road repairs. Property taxes provide a large source of stable funds that factor into just about every local government’s annual budget. In 2022, property taxes counted toward 42% of the city’s collected tax dollars.
As the amount of real estate taxes you pay can fluctuate within a wide range, you should find out the details of the typical property taxes assessed on a home before you buy. Tax assessors base property taxes on the value of the land and the property, sometimes taking square footage into account, but they do not factor in items like modernized décor. Home renovations may increase your property taxes if they increase the overall market value or square footage of your home.
What Sort of Property Tax in NYC Should You Expect to Pay?
Buyers in NYC can ask their real estate agent about estimated property taxes for a home prior to making an offer. RealtyHop’s real estate listings also include the projected monthly property tax amount to help consumers measure this expense. Users can find the estiamted monthly property taxes but scrolling down to the property analysis.
Image Source: RealtyHop Listing
NYC’s Department of Finance determines the annual property tax using a calculation that starts with an estimate of the home’s market value. This means the Manhattan property tax for a million-dollar penthouse will typically exceed the assessed amount for a studio co-op. However, homeowners can use tax exemptions and abatements to lower their property taxes.
Property Taxes for Single-Family Homes in NYC
In NYC, property tax calculations differ for single-family homes versus condos and co-ops. To calculate property taxes for single-family homes, a tax assessor first measures the market value based on recent sales data or other available information. For single family homes in NYC, the assessed value currently equals 6% of market value. The assessed value multiplied by the current tax rate determines the property taxes for the home.
Condos and Co-ops
NYC assesses property taxes for condos and co-op units differently than single-family homes. Rather than use sales price for a recent market value estimate, tax assessors also take the potential for rental income of the unit into account. Even if the owner does not rent the property, the tax value will reflect the ability of the condo or co-op unit to yield rental income. The city’s tax rate, determined each year by the city council, multiplied by the assessed value, equals the owed amount of property tax.
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NYC Property Tax Exemptions
Qualifying NYC property owners may apply for one of many exemptions and abatements available to help lower their property tax bill. What’s the difference between an exemption and an abatement? An exemption reduces the property’s assessed value prior to calculating property tax. Abatements take effect later in the calculation by lowering the final tax amount, typically for a set number of years. If you wish to apply for an exemption or abatement, you must submit the proper paperwork by the annual deadline of February 15th for co-op or condo abatements and March 15th for personal exemptions.
Some common abatements and exemptions in NYC include the following:
Seniors
Older residents with reduced income may qualify for an exemption that lowers their NYC property taxes.
STAR
The New York School Tax Relief program provides a property tax exemption to households below a certain income limit. Also, an Enhanced STAR program exemption applies to residents 65 and older with income below $93,200.
Disabled Homeowners
Disabled homeowners may qualify for a personal tax exemption. Those disabled due to a crime or while acting as a good Samaritan may also qualify for an additional tax exemption.
Veterans
Qualifying veterans, unmarried surviving spouses, and Gold Star parents may apply for NYC property tax exemptions.
Clergy
NYC offers property tax exemptions for clergy members meeting certain residency and work requirements. Retired clergy members over the age of 70 and unmarried spouses of deceased clergy members may also qualify for this exemption.
Green Building
NYC provides abatements for residential properties with solar panels or green roofs. Additionally, homeowners may apply for New York State property tax abatements for alternative energy systems, such as solar energy.
Condo & Co–op Abatements
Some condo and co-op owners may receive abatements on taxes for properties constructed in specific NYC neighborhoods. If a building qualifies for an abatement, each owner must then meet certain income and residency requirements to take advantage of the reduction in property taxes. You may also qualify for abatements after property renovations. The abatement will hold assessed values to pre-renovation levels for a period of time.
How Do I Pay Property Taxes?
Most homeowners can work with their mortgage lender to add an estimated tax amount on top of their monthly mortgage payment. This process, called escrow, helps homeowners to budget for property tax expenses each month rather than paying a large bill once or twice each year. If you choose to escrow property taxes, your lender may receive your bills on your behalf. The lender will also pay the property tax bill for you each year.
If you do not escrow your taxes, you can find your NYC tax bill online. Homeowners may also receive a bill in the mail telling them much they owe each year. If you do not receive a bill in the mail, you still bear the responsibility of paying property taxes, so you should check online, ask your mortgage lender if they received the information, or contact the NYC Department of Finance with questions.
If homeowners fail to pay property taxes, the taxing authority may place a lien on the property. Any liens on a home may impede with a homeowner’s abililty to sell their property in the future.
Conclusion
New and experienced buyers should consider New York City real estate taxes when making an offer on a home, as they can impact monthly expenses. Sales taxes and income taxes in NYC may run higher than other areas of the country, which can affect your overall household budget. First-time homebuyers may also receive tax benefits to help afford the cost of homeownership. Prospective buyers should consider all monthly expenses when analyzing their budget and the amount they can afford to spend on a home.
