Calculating Property Tax in NYC

[Edward Casano]

Hi All,

I recently began my search for a multi-family property to buy and hold in NYC and have been getting caught up in the tax calculations. I worked with a couple different lenders and they didn't completely understand the rates either (not a good sign!). So, I'm hoping the Bigger Pockets community can help with this question.

The NYC Department of Finance Website says you calculate your tax rate by:

Market Value (MV) x Class Assessment Ratio (6% for Class 1 Property) = Assessed Value (AV). So, if your MV is 1,000,000 then your AV (or "Taxable Value" if there are no exemptions) would be $60,000. A taxable value of $60,000 x Class 1 Tax Rate of 19.554% = $11,732.4 in taxes anually...

However, an import step is to apply the state law rules which limit how much the AV can increase from one year to the next. In the case of a Class 1 property, this is 6%. The lower amount between the two calculations your AV.

So if the current AV on a property is $15,525 (you can look up the current tax bills on properties through NYC Finance) then I'm thinking more simple calculation would be Current AV on Tax Bill ($15,525) + 6% ($931.5) = $16,456.5 x Tax Rate for Class 1 (19.554%) = $3,217.9 annual tax bill. I've increased the value by 6% (the limit it can increase) to be safe and since most properties I'm looking at haven't been assessed in some time.

Does this math check out or am I overlooking some critical points?

Thanks,

Ed