Townhouse tax

The current system, which was enacted in 1981 over a gubernatorial veto, classifies all real estate parcels into four classes, as follows:

Tax Class 1 indicates the following types of primarily residential property:

One-, two-, and three-family homes
Condominiums of three stories or less that were originally built as condominiums
Condominiums of three dwelling units or less that were previously a one-, two-, or three-family home
single-family homes on cooperatively owned land, also known as "bungalows"
certain vacant land zoned for residential use or, if not located in Manhattan, vacant land adjoining improved Class 1 parcel.
In Class 1 for 2009, a tax rate of 16.196% is applied to 6% of the "market value."

Tax Class 2 is for all other primarily residential properties, including any residential condominiums not in Class 1. This includes co-ops, but does not include hotels, motels, or other similar property.

In class 2 for 2009, a tax rate of 12.596% is applied to 45% of the "market value."

Tax Class 3 includes real estate of utility corporations and special franchise properties, excluding land and certain buildings. Class 3, which includes utilities' capital, is ambiguously under-reported in the published tax rolls. But, it is a small fraction of the city's overall real estate value, and, because it contains no land values, has little to do to do with our current analysis.

Tax Class 4 is all commercial real estate. It includes all other properties, such as stores, warehouses, hotels, and any vacant land not classified as Class 1.

In class 4 for 2009, a tax rate of 10.241% is applied to 45% of the "market value".

Soon, we begin to see how this system is set up to give homeowners preferential treatment. But note how this is disguised! It looks as though Class 1 is subject to a fairly high property tax of over 16%. (And has been slowly climbing for some years!) Yet that rate is applied to only six per cent of the market value.

so it depends on if it is a 1-3 family or four family......

Thanks, User.

Amazing the amount of obfuscation built into the system.

I guess then the question is how "market value" is calculated. My impression is that that figure is typically way below actual value.

Assuming it's a one family house, what would the effective tax rate be?

alpha
No, I think what you are seeing is something else and more simple.
Some ads are listing the taxes per month and others for the year.
(at least that's what Ive assumed when I see ads for one 4 story townhouse listing "taxes $1800" and then another one listing "taxes $26,000.")

no Truth - taxes for Townhouses in Brooklyn - 1-3 family range from $5-10K. Townhouses in Manhattan 1-3 family range $10-15K per year. This is based on the calculation above off an assessed value of that home.

If the townhouse is a 4 family then taxes are dramatically higher.

The tax rates for a townhouse in Brooklyn are an amazing deal $5-7K for a $2.5 million house.

User: There are very few THs in Manhattan below 96th street (1-3fam class) that have taxes below 20k/year.
There is a significant advantage to having owned a 1-3fam class house for a long time - tax increases barring C of O change and/or sig. reno are limited annually (and esp. advantageous for class 1 properties).

Ball park - you're looking at 30k annual taxes in Manhattan below 96th for a 6m TH, especially if you renovate and change the C of O. You may get lucky and get an assessment that results in a 20k annual tax bill. Usually, if the C of O does not need to be changed, your taxes will be lower than what they would be if they were reassessed to take into account significant change/renovation as you're capped - as previously explained.

Utilities - 12k/year.
Mtce - depends on condition of building.

206 east 20th
Listed taxes $17,072

410 east 9th st
Listed taxes $15,471

253 west 21st
Listed taxes $762
http://streeteasy.com/nyc/sale/546775-townhouse-253-west-21st-street-chelsea-new-york

43 king st
Listed taxes $1722
http://streeteasy.com/nyc/sale/475818-townhouse-43-king-street-soho-new-york

Of course some could be typos, missing a digit, or just plain wrong....

"Amazing the amount of obfuscation built into the system." Topper, you have to remember the more times a house has been sold for flipped, the more tax assesments it will get and be a more "current" tax.

edit
"sold for flipped" to "sold or flipped"

I don't know where you're pulling the #s from, but this is from NYC Finance
(http://webapps.nyc.gov:8084/CICS/fin1/find001i):

Changing ownership does NOT matter.

Changes in assessment value caused by C of O changes + renovation work.

1) 206 east 20th - last year, $21,301.52
This year - $32,553.54

Annual Tax before Exemptions & Abatements (I think they have RS/RC/SCRIE tenants) - $64,947

2) 410 east 9th - $16,400.00 Based on the low assessed value (95,974) but high market (4.35m), I'd say this has been in the same tax class/no sig. work for a long time

3) 253 west 21st - $9145

Same story as number 2 - market value $2.52m, but assessed only $55,137.

4) 43 King St - I'll let you do this one.

And I just burned my 1 free search per day on propertyshark to check 43 King St.
It shows $20,669 for 2010 ....or $1722.42 per month..........dadaaaah

The NYC Dept of Finance gives you the best #s as well as a very good idea of why the taxes are what they are.

If you want to score a TH with low taxes, look for one that's had its current C of O for a long time (particularly 1-3 fam). If you do work, try not to do work that triggers a re-evaluation of the ASSESSED value.

LOL...dumb luck we did it at the same time and I picked 43 King!

The numbers I put up are what's listed on streeteasy's page. I could only post two links per post or SE kicks it out as attempted spam. All you have to do is typ in the address in SE's search and read it yourself
The original poster asked why some tax #s are listed in the hundreds and some in the tens of thousands. My explanation of some are listed in per month, some per year is the best answer so far.

Changing ownership does NOT matter" Of course it does...have bought several properties in long island over my life. The ones I held for 10 years plus went up lightly each year.
The biggest jumps were right after purchase as your assessment was confirmed by your purchase price!

Truthskr: this may be true in LI, NJ, CA, wherever but I can tell you with 100% certainty that changing ownership is NOT what triggers an re-evaluation of the assessment value in New York City.

Market value changes every year, and that provides a basis for the MAXIMUM assessed value.
The assessed value is capped (I think 6 annually, 20 over 5/6 years - not sure of exact #s) but the cap is removed when you do a C of O change and/or what the Dept of Finance considers a significant renovation.

Your experience in LI, with all respect, does not apply.

And yes, some THs when listed for sale or whatever have taxes listed monthly as opposed to annually.

Hmm, what kind of work would trigger a reassessment, paint job, redoing kitchen, or installing HVAC? I really don't see any TH on the market below 6m that doesn't not have outdated interiors that needs renovations, would hate to trigger reassessment from just making the space more livable.

Truthskr: The difference is, in NYC, your market value changes every year, so they don't need to have "confirmation" of value based on your new purchase price.

You will see radically different assessed values for THs with the same market value.

Pick any TH and I will explain why the taxes are the way they are.

Alpha: that is the mystery.

Paint job would not require filing a permit, so no, would not trigger a change in assessed value.
Redoing kitchen, if you're not pulling a plumbing permit, same deal (and you don't have to, if you're
replacing fixtures).
Not sure about HVAC - but you can argue this as a minor improvement.

Bottom line is you hope and pray that your assessed value doesn't change, and if you feel that it shouldn't
(because what you're doing is a necessary repair), then you challenge the Dept of Finance.

I thougth in lieu of taxes, you just had to deal with a tenant paying $130/month, while they curse you to clean the stoop?

So, if you wanted to maximize your chances of not triggering a tax change.

Don't buy a place that requires a relocation of plumbing stack & mechanicals. Do work in stages. Buy a place that is already 1-3 fam or has desired C of O. If you buy a wreck that has 3+fam C of O, pull a permit with minimum work itemized on the permit. Do the work, move in. See where the re-assessment falls ( you will get one bcs of C of O change). Protest (legitimately) that you've done little work, only necessary repairs. When you are as happy as you can be with the assessment, do the work while you've moved in - and if you get hassled, say it's cosmetics.

Of course, that's why greedy LLs get a tax abatement/exemption when they have RS/RC/SCRIE tenants. Right, Jazzman?

No worries NYC, Im a seeker(of knowledge) not a fighter(mostly :)).Things do get done differently within city limits and I take your word for it.

However the 4 listings I posted appear accurate.
BTW, Had trouble with your NYC finance tax link and used the following;
http://nycserv.nyc.gov/NYCServWeb/NYCSERVMain

It gives the future quarterly tax statements owed;
1)206 east 20th shows 2 statement, one for 1/1/2011 for $4360. One for 4/1/2011 for $4272.36. Anyway that makes the listing of @17K for the most part correct.

2)410 east 9th st
shows three future quarterly statements between $4k and $4.1K. that makes the listing of $15,471 close enough.

3)253 West 21st
shows 3 future quarterly statements around $2250 per. That is indeed $9000. The listing showing $762 if it were per month comes to $9144, again ...close enough

4)43 King already covered.

Truthskr:

Check out 317 west 77th. 10? units. Market value - 1.9m ish, maybe lower now. Sold for 3.8m recently. Taxes appear to be 80k+ in latest quarterly statement.

If I were the owner, I would file right away to demolish extra kitchens, ratchet C of down to a Tax Class 1, get the new assessment, then do the remainder of the work.

"Check out 317 west 77th. 10?"
I'm showing only one statement for 1/1/2011 for $43,311.96.
So it's either a yearly bill (highly doubtful) or it's 1/4th of $160K....ouch.

Now what you suggest is out of my league but I get the gist of what your saying.

You know every time I ask my accoutant about some semi complex accounting matter he says to me "ask my attorney," and when I ask my attorney about some tax law he says "ask my accountant." They drive me nuts.

If you want the best deal in NYC for single-fam THs, look in Brooklyn. You can buy a completely renovated TH with low taxes, or a TH with the "correct" C of O that won't trigger a tax increase.

I also hear that various areas of Qns are similarly advantaged in taxes.

So what would be the likely tax implications of this scenario (it's a Harlem property): townhouse is classified as C-2 (5-6 walkup). Last sold in 2004, with extensive work done since. It is now a 3-family, but we would probably use it as a single family. Current tax bill is very modest (on the order of 4k/year) and we would not need to do any major work. Does this suggest that there's been a mistake and the current tax charges will jump sometime soon? Or would we be ok because no major work is contemplated that would change the C of O? (could they have done the work since 2004 under the radar without getting a proper C of O?). Thanks in advance to anyone with insights.

If the current tax bill is modest, and you are okay with the status of the C of O, your assessment value (NOT market value) is capped at the C2 rates. You don't have to worry about changes in the market value. Assessment value is capped. I have been told by some people that the Dept of Finance "ignores" actual C of O, and goes by the actual usage to get the tax class. That still works to your advantage, unless they change assessed value.

I would advise against doing any work that necessitates the filing of permits and/or C of O. 4k annually is very good.

If you are interested in the tax history of any house on that block or nabe, just look it up in Dept of Finance website. IMO, it's way safer and "cleaner" just to buy a house that has a C of O reflecting actual (and future) usage. Worth paying a little extra for.

You're mommyesq.

My thoughts on whether actual usage needs to be reflected by C of O hinges on liability. If you don't have tenants or anyone who could potentially sue you by using incorrect C of O, then I don't see how it matters if you have house classified as X, and using it as Y. Of course, you need to square it with your insurers & mortgage co.

Looking down the road, keep in mind that if things (economically) continue for NYC, higher incomes leaving state, stayers earning less,etc., no bonuses that "will blow our minds," don't be surprised something that can't "go somewhere else" to be aggressively targeted by taxes......properties.

Of course the city can't rely on cigarette taxes even if;
a) you catch all the cheating bodegas with the false stamps
b) you violate a contract made with native americans on taxes
c) you don't ban smoking everywhere anyway

Thanks, nyc100023 and truthskr10! 10023, you are a fount of information.

thanks for all your insights. Does a complete gut renovation of a single family TH (new kitchens, new baths, adding HVAC, some electricals, reinstating old fireplaces, etc. count as a "physical change" to property and thereby changing tax level even though C of O status does not change?