What are the yearly taxes for Manhattan townhouses?

The annual taxes for Manhattan townhouses can vary between $5000 and $6000. Every year, the NYC Council sets the tax rate for different classes of property. For 2009-2010, the tax rate was 17.088% for Class 1, 13.241% - Class 2, 12.743% - Class 3, and 10.426% for Class 4. Home owners can determine their real estate taxes by applying the assigned percentage to their property's taxable assessed value. The property tax assessment is a specific percentage of the market value. The taxable assessed value is the assessed value minus any exemptions.

How does the Department of Finance estimate your property value?

The Department of Finance bases property value on three factors – cost, sales comparison, and income capitalization. The department must estimate all property values by January 5 of each year. This constant reevaluation is meant to reflect the ever-evolving New York City real estate market.

Cost

They use this method for specialty properties including utility properties. They estimate the value of the land and figure out how much it would cost to replace (or reproduce) the existing building on that land.

Sales Comparison

The Department of Finance must check into the recent sales of similar properties. Using this method, their officials can determine the 'probable' selling price of a property. The value of smaller, residential properties (such as 1-3 family homes) is determined in this manner.  

Income Capitalization

This method is used for properties that produce income such as multi-family buildings and office spaces. The value is based on the income possibilities. The department looks into income and expenses as well as the capitalization rate (rate of return for investor). State law requires that the Department of Finance value condominiums and cooperatives as rental apartment buildings. The value is based on the estimate of income (rent from residents) received by the owners.

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How does Finance determine tax assessments?

1. Put property in one of four classes.

Class 1
Most residential property – up to 3 units - 1-3 family homes – office with 1-2 apartments – vacant land – condos not 3 stories

Class 2
All other residential property (or primarily residential such as condominiums)

Class 3
Property with utility company-owned property

Class 4
Any commercial or private property that does not fall into other three classes

2. State law requires that Finance assess property in each class at the "assessment ratio."
The Department of Finance is required to assess properties in each class at the same percentage of value. The Department of Finance must multiply its estimated market value by the assessment ratio for your property according to its proper class. If the assessment ratio is 9% in Class 1, a $100,000 property will receive an assessment of $9,000. If a $100,000 property fell into Class 2 and the assessment ratio was 45%, the assessment would be $45,000.

3. The Department of Finance must follow specific assessment rules.
The Department of Finance is obliged by state law to follow specific assessment rules – unless the change is due to a physical increase (renovation, construction, demolition).

Class 1
Assessments on a property cannot be increased more than 6 percent each year (or more than 20 percent in five years).

Class 2
Assessments on properties with less than 11 units cannot be increased more than 8 percent per year (or more than 30 percent in five years). Assessment can change on properties with more than 10 units but the changes must be phased-in over five years.

Class 3
There are no assessment limitations in Class 3.

Class 4
There can be assessment changes but they must be phased-in over five years.

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Are There Any Exemptions Or Abatements?

The Department of Finance offers several exemption programs. To encourage construction and renovations, they implemented 421-a-c and J-51. Non-profit organizations receive an exemption (420-a). As well, certain individuals can receive an exemption (disabled, seniors, veterans, and others).

Condominiums and cooperatives receive an exemption in the form of tax relief. Their taxable assessed value is reduced and this initiative reduces their taxes. The exemption reduces the base rate used to calculate their real estate taxes. Abatements are calculated in June after the new tax rate is set for the year.

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