Definitions of Property Assessment Terms

Department of Finance


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Definitions of property assessment terms

The following alphabetical listing of terms is provided to help you understand property valuation and tax assessment:

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) or exemptions are applied.

Assessed value

The amount used to calculate your property taxes. The formula for calculating assessed value is market value times level of assessment equals assessed value. For tax 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. In January, the tentative assessment roll is published and you are given the chance to request changes. In May, the final assessment 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 equals yearly net operating income divided by total value.

Comparable sales method

The market value of properties 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 property’s assessed value can increase annually, then the property will have an effective market value. This value takes into account your capped assessed value. For tax class 1 properties, the effective market value is calculated by dividing your assessed value (based on caps) by 6%. For class 2a, 2b, and 2c 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 New York City Tax Commission.

Exemptions

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

The City’s fiscal year, used for financial reporting, begins July 1 and ends June 30.

Income capitalization approach

The Department of Finance’s estimate of your property’s worth.

Income capitalization approach

The valuation of property based on its estimated future income.

Level of assessment

The percentage of market value used to calculate your property’s assessed value. Also known as the assessment ratio. For tax class 1, the level of assessment is 6%. For tax classes 2, 3, and 4 it is 45%.

Market value

The Department of Finance’s estimate of your property’s worth.

Notice of Property Value (NOPV)

An annual notice with details about your property reflecting 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 four classes:

Class 1: Most residential property of up to three units (including 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- to 6-unit rental building)

Sub-class 2b (7- to 10-unit rental building)

Sub-class 2c (2- to 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). The transitional assessed value is applicable to all tax class 4 properties and also tax class 2 cooperatives, condominiums, and rental buildings with more than 10 units.