You own a condo or co-op here in New York City - what a dream! And the property taxes? Well, a little less dreamlike, yet an important part of homeownership.
The process around property taxes can feel more complicated than it should - particularly if you don’t have an extensive finance background, or a Latin degree (how does one even say tax “certiorari”?).
As we enter a new year with deadlines approaching, we’re here to break it all down so you know exactly what to expect:
- What are property taxes?
- How are property taxes calculated?
- What deadlines are most important to watch out for, and when should you file an appeal?
Property taxes annual timeline
Here in New York, property taxes are an every-year thing that generally follows the below timeline. We’ll get more into the details of all of these later in this article.
- Mid-January: Department of Finance mails notice of property value (NOPV) that includes tentative assessment
- February 15: Deadline for condos/co-ops to apply for tax abatement
- March 1: Deadline for condo/co-op to submit assessment appeal to Tax Commission
- March 15: Deadline for owners/shareholders to apply for personal exemptions
- May: Department of Finance releases final assessment
- June: You receive your first property tax bill for the tax year that begins July 1 (shows all exemptions and abatements)
- July 1: New tax year starts, you’re taxed at previous year’s rate if the rate for the new tax year has not been adopted by June 6
- November: City council votes on the tax rates, mayor signs off on them, and property taxes for the first part of the year are re-calculated at the new rate
First, what are property taxes?
Officially, property taxes are an “ad valorem” (hello, Latin!) tax all homeowners pay on their owned property. New York City’s Department of Finance calculates these taxes based on an “assessed value” of your property (more to come on this).
Property taxes, while a bit cumbersome, are an important government revenue stream that’s put toward government services and improvement projects, such as public schooling, fire departments, new roads, business programs, and more.
So, how does the Department of Finance (DOF) calculate property taxes?
1. The DOF determines the market value of your property.
Before calculating the assessed value, the Department of Finance estimates your condo or co-op’s market value based on class and income-producing potential. Wait, “income-producing potential”?
Yes, you read that right. For larger condos and co-ops (11+ units), the DOF uses rental properties of the same size, location, units, and age of your building to estimate potential income and expenses. Then, a capitalization rate - an expected rate of return based on your building’s income - is applied to that estimated net income. For co-ops, this market value is provided for the entire building while for condos, the market value is determined for the entire building and per unit.
Smaller condos and co-ops (4-10 units) are a little different. While they’re also valued as if they’re income-producing properties, the DOF uses a gross income multiplier method. This really just means an estimated total potential income is multiplied by a certain factor to calculate the market value. For example, a building with a potential income of $100K and a multiplier of 10 will be valued at $1 million.
2. Then, the DOF determines the assessed value. Finally!
The assessed value is calculated by taking your building’s estimated market value and multiplying it by 45%.
- Calculating the assessed value for small buildings: Assessed value increases for small buildings are capped at no more than 8% from the prior year or 30% over five years. This means they’ll either receive an assessed value of 45% of market value or the capped amount - whichever is lower. But, any physical changes are applied in full to the market value, then assessed at 15% for renovations and 45% for new builds.
- Calculating the assessed value for large buildings: Larger buildings have what’s called transitional assessed values, which are value increases that are phased in over five-year periods. These are leveraged when the transitional assessed value is lower than your actual assessed value. Similar to small buildings, any physical changes are applied in full to your market value, then multiplied by 45%.
The DOF mails out a notice of property value (NOPV) in January of every month that includes your property’s estimated market and assessed value. Why’s this important? This shows the estimations the DOF has made regarding your building to review. Think your building has been assessed too high? You have a chance to appeal. We’ll get to that as well.
3. Apply for tax reductions.
Once the DOF has crunched all your building numbers and shared your estimated assessed value, it’s time you start pulling some levers of your own. First, there are a few different tax breaks and abatements you and your building might be able to take advantage of to lower your property tax.
Personal exemptions: Due on March 15, these exemptions are specifically tailored for seniors, veterans, clergy members, people with disabilities, and other homeowners. Feel free to check out more details about these exemptions here.
Building exemptions: These reduce assessed values before taxes are calculated.
- 421 exemptions: Partial tax exemption for new residential constructions (implemented by the DOF).
- J51 exemptions: Partial tax exemption for residential renovations (implemented by the DOF).
Building abatements: These reduce your taxes after they have been calculated.
- Condo and co-op tax abatement: Due on February 15, the property tax abatement levels the playing field with single to three-family homes. Check out our tax abatement guide here, including renewal deadlines plus everything you need to know about the prevailing wage affidavit. Remember, it’s the responsibility of your property management company to ensure your renewal is filed before the due date.
- J51 abatement: Property tax abatement for residential renovations (implemented by the DOF).
- Solar energy: Property tax abatement for properties that use solar power via solar panels (implemented by the DOF).
- Green roof: One-time property tax abatement for properties that have green roofs (implemented by the DOF).
4. The DOF calculates your property tax bills.
After all the above work, the DOF then uses the city’s annual tax rate, published in November of every year, to your assessed value, and subtracts any abatements from the total amount owed. The final result: your property tax bill.
Tax certiorari: How to appeal your assessed property value
Hello again, Latin! Tax certiorari is a fancy wayfor the legal process by which a property owner can appeal tax assessments.
It’s no secret - the city’s fairly lazy when it comes to calculating assessed values for condos and co-ops. They don't make the effort to actually understanding the specific charms of your building. Rather, they “legal fictions” and base important assumptions off rental buildings and real estate resources like Streeteasy to calculate your property’s value. Why? Because they’re hoping you’ll be just as lazy and pay your property tax as is.
But, what if the assessment is wrong? What if the city is asking for way more than it should? Well, you can appeal!
The city tries to make the appeal process appear easy and straightforward, even stating you don’t need a lawyer to file an appeal. And while this may be technically true, it’s not necessarily wise.
The good news is there’s a smarter way to appeal your assessed value. Partnering with an expert property management company and attorney firm will ensure:
- You’ll approach the appeal and hearings with the very best evidence, arguments, and reps.
- You’ll feel confident that all necessary documents are prepared, signed, and submitted by the final deadline, March 1.
- You’ll be well prepared for any city loopholes and tricks. The DOF is looking for any excuse not to provide you with a reduction in your assessment, but the right team will be up to the task to ensure all T’s are crossed and I’s are dotted.
Paying property tax bills
After you’ve received your estimated values, appealed, and (hopefully) won your case, it’s time to pay your property taxes. As a refresher, co-op shareholders don’t pay their taxes directly - rather they’re collected in common charges and paid as a building (check out our co-op budget page for a deeper dive). On the other hand, condo owners have their own separate real estate taxes on their property they’re directly responsible for paying.
If your home's assessed under $250K, property taxes are due quarterly:
- July 1
- October 1
- January 1
- April 1
If your home's assessed above $250K, property taxes are due semiannually:
- January 1
- July 1
At Daisy, we believe that knowing our condos and co-ops inside and out is imperative for building and financial health. We monitor every health point in your building and only partner with the top attorneys in the city to ensure you’re only paying the tax amount you should. If you have questions about your property assessed value, need help filing your building’s tax abatement, or are looking for legal support, feel free to reach out to us here.