Housing & Real Estate Reviewed July 2026
How NYC property taxes work
Four classes, two assessment ratios, caps on top of caps. The strangest property tax system in America, explained from the statute and the city's own math.
The numbers that matter
- The four classes
- Class 1: one-to-three family homes. Class 2: other residential (co-ops, condos, rentals). Class 3: utility property. Class 4: everything else (offices, stores) (NY Real Property Tax Law § 1802, read July 2026)
- Current tax rates
- Class 1: 19.843%. Class 2: 12.439%. Class 3: 11.108%. Class 4: 10.848% (applied to assessed value, not market value) (NYC Department of Finance, read July 2026)
- Assessment ratio
- Class 1 homes are assessed at 6% of market value; classes 2, 3, and 4 at 45% (NYC Department of Finance, read July 2026)
- The caps
- Class 1 assessments can rise at most 6% a year and 20% over five years; small class 2 buildings 8% a year and 30% over five (NYC Department of Finance, read July 2026)
Start with the four classes
Everything about your property tax bill descends from one sorting decision written into state law. Every property in the city lands in one of four classes, and the class determines your rate, your assessment ratio, and your caps. The statute does the sorting:
Class one: (a) all one, two and three family residential real property, including such dwellings used in part for nonresidential purposes but which are used primarily for residential purposes
Class two: all other residential real property which is not designated as class one, except hotels and motels and other similar commercial property; Class three: utility real property and property subject to former section four hundred seventy of this chapter; Class four: all other real property which is not designated as class one, class two, or class three.
Translation: class 1 is houses, class 2 is apartment buildings, co-ops and condos, class 3 is Con Ed's pipes and wires, class 4 is offices and stores. The 'special assessing unit' in the title is legalese for New York City (and Nassau County); this whole architecture was built for here.
Market value is not what you're taxed on
The city estimates what your property is worth, then taxes you on a fraction of it. That fraction is where the system starts to bend, because the fraction depends on your class:
Your assessed value is based on a percentage of your market value. This percentage is known as the level of assessment or assessment ratio. Your assessment ratio depends on your tax class.
The ratios: 6% of market value for class 1 homes, 45% for everything else. Yes, a brownstone is assessed on six cents of every dollar of value and a rental building on forty-five. This single asymmetry, stacked with the caps below, is why identical-value properties pay wildly different taxes.
The caps that quietly run the system
On top of the ratio, state law limits how fast a home's assessed value can climb, no matter what the market does:
Tax class 1: 6% per year and no more than 20% over 5 years. ... Tax classes 2a, 2b, and 2c: 8% per year and no more than 30% over five years for buildings with 10 or fewer units.
You may find that even when your market value has gone down, your assessed value continues to go up.
The city's own page, deadpan. The caps mean a fast-appreciating home builds a backlog of untaxed value that keeps phasing in for years, even through a downturn. It also means two neighbors with identical homes can pay very different bills depending on when their values ran up.
Then, finally, the rate
The City Council sets the rates each year when it adopts the budget. The current schedule, from the Department of Finance:
Your property tax rate is based on your tax class. There are four tax classes. The tax rates are listed below. ... Class 1 - 19.843% ... Class 2 - 12.439% ... Class 3 - 11.108% ... Class 4 - 10.848%
Do not read the class 1 rate as houses paying most. The rate applies to assessed value, and class 1's assessed value is only 6% of market value. High rate on a small base: the effective tax rate on a one-family home is typically far below the rate on a rental building of the same market value, which is the system's core inequity and the reason reform keeps being proposed and keeps dying.
So the formula, start to finish: the state statute sorts you into a class, the city estimates your market value, applies the class's assessment ratio, applies the caps, subtracts any exemptions, and multiplies what's left by the class rate. Every strange property tax bill in the city is one of those steps doing something unintuitive.
The questions New Yorkers actually ask
What are the four NYC property tax classes?
Set by state law (Real Property Tax Law § 1802): class 1 is one-to-three family homes, class 2 is other residential property like co-ops, condos, and rental buildings, class 3 is utility property, and class 4 is commercial and everything else.
Why is my assessed value so much lower than my market value?
By design. Class 1 homes are assessed at 6% of market value and other classes at 45%, and state law caps how fast class 1 assessments can rise: 6% a year, 20% over five years. Your tax rate applies to that assessed value, not your market value.
Why did my assessed value go up when home prices fell?
The caps create a backlog. If your market value ran up faster than the 6%-a-year cap allowed the assessment to follow, the assessment keeps climbing toward the ratio even in a down year. The Department of Finance says this plainly on its own page.
Who sets the property tax rate?
The City Council, each year, as part of adopting the budget. The class shares are constrained by state law, which is one of several reasons real reform of the four-class system needs Albany, not just City Hall.
The documents
The public records this page draws on. Read them yourself:
This is the background. The brief is what’s happening now.
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