The New York Metropolitan Area reaps the benefits of having some of the highest average income levels in the United States, but those high incomes come at a price in the form of property taxes. Of course, your income is not directly correlated to how much you pay in property taxes. But if you work in an area of relative wealth, chances are you also live in a region where property values are much higher – and that’s where the property tax bill comes into play for owners. Nowhere is that more evident than right here in New York City.
While real estate markets in every region tend to ebb and flow, prices in NYC seem to keep rising, and with them, property tax assessments. In fact, the NYC market surged so aggressively in 2014 that for 2015, the New York Post reported property taxes would increase astronomically (from a $448 increase for the average non-luxury co-op to a whopping $2,131 increase for a single-family townhouse). With the mind-blowing complexity of the city’s tax code, it’s an intimidating endeavor for most people to navigate, and experts have called for changes to the system.
But until that time comes, what’s a buyer to do? Below are a few tips and resources to help you get started.
1. Learn how NYC’s property tax system works.
It’s one thing to get a bill and write a check, but when you’re dealing with the most significant investment of your life, you’ll want to do your due diligence to understand how the costs for your home may be affected by fluctuating (read: rising) values and tax assessments – especially if your resources (read: salary) may not be growing at the same rate. NYC.gov is a wealth of information, with rates, calculators and other resources available to the public.
2. Separate myth from reality.
Because the tax code is so difficult to fully understand, myths have built up over decades of oversimplifications and misunderstandings of the details. Tonya Moreno, a CPA, recently broke down the most common misconceptions in her blog post, “Property Tax Myths, Misconceptions and Terms,” on the financial blog, The Balance.
3. Know which exemptions are available to you.
New York State makes available a long list exemptions for veterans, persons with disabilities, senior citizens and the School Tax Relief (STAR) program, among others. A property tax specialist can show you which exemptions you may be eligible for and help you apply for programs that can lower your tax bill.
4. Beware of fading exemptions.
The 421a exemption program was created in 1971 to encourage development of underutilized and unused land, and the exemption period lasts 10 to 25 years depending on various circumstances.
Devon Shapiro, CPA and Property Tax Consultant with Hucke and Associates, states, “It is important for buyers to understand where the property is on the exemption timeline when they buy. The exemption begins to wear off at the end of the period, which leads to significantly higher taxes. In certain situations, some properties may seem to have little to no tax liability when in reality they are just benefiting from the exemption program.”