New York State Property Tax Assessments and the Homestead Option

By Iavarone, Alison J. | The CPA Journal, April 2014 | Go to article overview

New York State Property Tax Assessments and the Homestead Option


Iavarone, Alison J., The CPA Journal


Real property taxes make up the largest portion of state tax revenues. On average, they represent 35% of the total state tax collected, followed by sales and gross receipts (34%), individual income (20%), corporate income (3%), other taxes (6%), and motor vehicles (2%), according to the Tax Foundation (Liz Malm and Ellen Kant, "The Sources of State and Local Revenues," Jan. 29, 2013). The New York tri-state area ranks first, second, and third in state and local property taxes per capita: New Jersey at $2,819, Connecticut at $2,522, and New York at $2,280 (Richard Borean, "Monday Map: State and Local Property Tax Collections Per Capita," Tax Foundation, Jun. 10, 2013). Furthermore, for property taxes as a percentage of income, the top 10 counties in the country are all located in New Jersey (7.24%) or New York (8.44%) (Nick Kasprak, "New York, New Jersey Lead Nation in Property Tax Burden," Tax Foundation, May 17, 2011).

Because property taxes make up the largest portion of state revenues and a good portion of a homeowner's income, state and local tax professionals must be well versed in this area. Furthermore, most Big Four and many other accounting firms no longer have property tax practices, so property owners typically seek guidance from non-CPAs who are typically paid based upon a contingent fee.

Reassessment of Property

In the state tax landscape, property taxes have become more relevant as jurisdictions look to shift the property tax burden to various classes of property owners and increase revenues on a larger tax base. Many New York towns are using the current economic environment to initiate a reassessment of property-that is, a process whereby all property within a jurisdiction undergoes a formal revaluation process. In some New York towns, reassessment has not been completed for decades. New York is one of the few states with no formal legal requirement for the reassessment of property on a regular basis. Instead, local elected officials determine the frequency of reassessments, which are not undertaken regularly.

Furthermore, New York State has unique property tax provisions; if property owners are not aware of these provisions and if they are implemented during reassessment, it could significantly impact property owners by shifting a disproportionate share of the tax burden to one or more classifications of property. (Note that New York City and Nassau County have specific guidelines for assessment, which have not been addressed in this article.)

The Basics of Real Property Tax Calculation

Real property tax is due to a locality based upon the value of the property. In New York State, property taxes are allocated to the county, town, village, and school, along with special taxing jurisdictions (e.g., library, ambulance, fire, light, refuse and sewer, garbage). Each local property tax jurisdiction (e.g., school, village, town) prepares a budget that is voted on for approval. If approved, the budget is reduced for any revenues that the locality expects. The remaining balance is the tax levy-that is, the amount of taxes needed to be collected from the property owners. The tax levy is the numerator in determining the property tax rate (also known as "millage rate" or "mill rate") for the computation of the property owners' tax.

Each property has an assessed value that represents the market value of the real estate; however, New York State does not require assessments at full market value. Pursuant to New York's Real Property Tax Law (RPTL) section 305(2), each assessing unit (local jurisdiction) is assessed a uniform percentage of value, called the level of assessment (LOA); consequently, the locality can choose to assess property at a portion of the market value as long as all property is assessed at the same uniform percentage of value. The LOA is determined each year by the assessor and can be found on the assessment rolls and tax bills.

The total assessed value is equal to the assessed value of all properties within a jurisdiction, which is based upon the LOA. …

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