Housing & Real Estate Reviewed 2026-08-17
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)
- Commercial (class 4)
- No percentage cap. Increases phase in at 20% of the change a year over five years, and you are billed on the lower of the actual or transitional value (NYC Department of Finance, read August 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.
If you own commercial property, none of those caps apply to you
The 6% and 8% caps above are the famous part of this system, and they cover only part of it. They apply to class 1 homes and to the small class 2 buildings (2a, 2b and 2c, ten units or fewer). Class 4 — every office, store, warehouse and factory in the city — has no percentage cap on how fast its assessed value can rise, and neither does a class 2 building with more than ten units. The city's own assessed-value page says so in a single line that is easy to read past: classes 2 and 4 are told to go read about transitional assessed values instead.
What they get instead is a phase-in, which softens a jump without limiting it:
The Department of Finance phases in changes to the assessed value of Class 2 properties with more than 10 units and Class 4 properties over a five-year period. This means that we apply 20% of the change each year for five years.
So the honest answer, for anyone asking how much the tax on a commercial building can rise over five years, is that there is no ceiling. A doubled market value is a doubled assessment; the phase-in only decides that you meet it in five 20% steps rather than all at once. And because several years' changes are usually mid-phase at the same time, a building carries two numbers at once:
The law requires that we use whichever number is lower — your actual assessed value or transitional assessed value — to determine your property tax bill.
That rule cuts in the owner's favour, and it is the one genuinely generous mechanic in the system: on the way up the transitional number is the lower one, so you are billed on the phase-in rather than the full jump. On the way down the actual value is lower, and you get the fall immediately instead of waiting five years for it. One exception, and it catches people who renovate:
Please note that if you make physical changes to your property, the full value of the improvements is applied — it is not transitioned in.
A gut renovation, an added floor, a converted loft: that value lands on the assessment in full, in the year the work is recognised, with no phase-in and no cap. It is the single fastest way a New York property tax bill moves.
Where co-ops and condos land in all this
A co-op or condo is class 2, not class 1, however much it feels like a house you own. That single sorting decision carries most of the consequences on this page: it means a 45% assessment ratio rather than 6%, the class 2 rate of 12.439% rather than class 1's 19.843%, and — for any building over ten units, which is most of them — the five-year phase-in above rather than the 8% annual cap. A small co-op of ten units or fewer is 2a, 2b or 2c and does keep the cap. The number of apartments in your building, not the deed in your hand, decides which system you live under.
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.
Is there a limit on how much NYC property tax can rise on a commercial property over five years?
No. The 6% and 8% assessment caps cover class 1 homes and small class 2 buildings of ten units or fewer. Class 4 commercial property, and class 2 buildings over ten units, have no percentage cap. The Department of Finance instead phases the change in, applying 20% of it a year for five years, and bills you on whichever is lower, the actual or the transitional assessed value.
Are co-ops and condos class 1 or class 2 in New York City?
Class 2. They are taxed at the class 2 rate of 12.439% on a 45% assessment ratio, not at class 1's 19.843% on 6%. Buildings of ten units or fewer are subclasses 2a, 2b or 2c and keep the 8%-a-year assessment cap; larger buildings get the five-year phase-in instead.
Does a renovation get phased in like everything else?
No. The Department of Finance states that where you make physical changes to a property, the full value of the improvements is applied and is not transitioned in. Renovation value hits the assessment in one step.
The documents
The public records this page draws on. Read them yourself:
Now watch the machinery move.
These pages explain how the city works on paper. The morning brief is how it worked today: what changed, what it means for your rent, your commute, and your block, in plain language.
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