The following alphabetical listing of terms is provided to help you understand property valuation and tax assessment:
[A-D] [E-R] [T-Z]
Abatements: Abatements reduce your taxes after they’ve been calculated. Different abatement programs are available for housing rehabilitation, revitalization and cooperatives and condominiums.
Actual Assessed Value: The assessed value before five year phase-in requirements (for some tax class 2 and all tax class 4 properties) and/or exemptions are applied.
Assessed Value: The amount used to calculate your property taxes. The formula for calculating Assessed Value is: Market Value X Level of Assessment = Assessed Value. For Classes 1, 2a, 2b and 2c, the Assessed Value is modified by caps on assessment increases.
Assessment Roll: The list of assessed values of all properties in NYC.
- January - the Tentative Roll is published and you are given the chance to request changes.
- May - the Final Roll is published. If changes are made to your property’s Assessed Value, you will receive a Revised Notice of Property Value.
Capitalization: Converting estimated future income and benefits into a present value.
Capitalization Rate: A rate of return used to estimate your property’s market value for tax purposes. The formula for calculating the Capitalization Rate is: Capitalization Rate = Yearly Net Operating Income/Total Value.
Comparable Sales Method: Properties’ Market Value based on sales of similar properties with adjustments for differences in size, location and time of the sale. This method is used to determine the Market Value of Tax Class 1 properties.
Effective Market Value: If State law limits how much your Assessed Value can increase annually, then you have an Effective Market Value. This value takes into account your capped Assessed Value. For Class 1 properties, it is calculated by dividing your Assessed Value (based on caps) by 6%. For Class 2a, b and c properties, it is calculated by dividing your Assessed Value by 45%. You must prove that your property is worth less than this number to have the value adjusted by the NYC Tax Commission or Courts.
Exemptions: Reduce your property’s assessed value before your taxes are calculated. A property may be partially or fully exempt depending on the amount of the exemption.
Exempt Value: The amount/or percentage of the Assessed Value that is not taxable.
Fiscal Year: July 1 – June 30, the 12-month period the City uses for financial reporting.
Income Capitalization Approach: Valuing property based on its estimated future income.
Level of Assessment: The % of market value used to calculate your property’s assessed value. Also known as the assessment ratio.
- Tax Class 1 – 6%
- Tax Class 2, 3 and 4 – 45%
Market Value: Finance’s estimate of your property’s worth.
Notice of Property Value: (NOPV) Your annual notice with details about your property that is produced every January. It reflects your property’s physical condition as of January 5. This information is used for the tax year that begins on July 1. If your value is changed you will receive a Revised Notice of Property Value.
Operating Expenses: All expenses related to operating a property except the principal and interest of a loan or mortgage and business expenses of the owner. Property taxes are omitted for assessment purposes.
Replacement Cost: The cost to replace or improve a portion of an existing structure, for the same purpose using modern building materials, current standards and building requirements.
Reproduction Cost: The cost to replicate an existing structure, using the same materials, standards, quality, and design as the original construction.
Tax Class: Property in NYC is divided into 4 classes:
- Class 1: Most residential property of up to three units (family homes and small stores or offices with one or two apartments attached), and most condominiums that are not more than three stories.
- Class 2: All other property that is not in Class 1 and is primarily residential (rentals, cooperatives and condominiums). Class 2 includes:
- Sub-Class 2a (4 – 6 unit rental building)
- Sub-Class 2b (7 – 10 unit rental building)
- Sub-Class 2c (2 – 10 unit cooperative or condominium)
- Class 2 (11 units or more).
- Class 3: Most utility property.
- Class 4: All commercial and industrial properties, such as office, retail, factory buildings and all other properties not included in tax classes 1, 2 or 3.
Tax Rate: The rate used to determine the tax you owe. The City Council and Mayor set an annual tax rate for each tax class.
Taxable Value: Actual or Transitional Assessed Value (whichever is less) minus any exemptions. This is used to calculate your annual tax bill.
Transitional Assessed Value: Increases to your Assessed Value are phased in at 20% per year (except for physical changes). Applicable to all Tax class 4 properties and also Tax class 2 cooperatives, condominiums and rental buildings with more than 10 units.