Market Value vs Assessed Value on Your NYC Tax Bill

Your NYC Notice of Property Value shows two numbers that do different jobs. Market value is the Department of Finance’s (DOF) estimate of what the property is worth under its valuation rules, which often isn’t what it would sell for. Assessed value is the part that actually gets taxed: a percentage of market value, held back by caps or phase-ins.

Because of those caps and phase-ins, your assessed value, and your tax, can keep rising for years after market value stops rising or even falls.

Why DOF’s market value isn’t your sale price

DOF uses a different method for each type of property:

• One- to three-family homes (Class 1): statistical models of sales of similar properties in the neighborhood over the prior three years. Your own sale is one data point, not the answer.
• Co-ops and condos (Class 2): state law requires DOF to value Class 2 as income-producing. In DOF’s words, “we value co-ops and condos as if they were rental buildings.” DOF estimates the rent the building could earn, subtracts expenses and turns that income into a value.
• Rental buildings (Class 2) and commercial property (Class 4): income and expenses, partly from the owner’s annual Real Property Income and Expense (RPIE) filing.

From market value to assessed value

DOF multiplies market value by the assessment level for your class: 6% for Class 1 and 45% for Classes 2, 3 and 4. That gives a target. What you’re taxed on is the lower of that target and the capped or phased-in figure.

Caps on Class 1 and small Class 2 buildings

For Class 1, assessed value can’t rise more than 6% in a year or 20% over five years. For Class 2 buildings with 10 or fewer units (subclasses 2a, 2b and 2c), the limits are 8% a year and 30% over five years.

Here is DOF’s own example for a one- to three-family home:

Look at Year 3. Market value fell from $150,000 to $140,000, yet assessed value rose 6%, from $6,360 to $6,741. That’s because the capped value was still well below the $8,400 that 6% of market value would allow. The tax follows the assessed value up.

A small rental building (Class 2a), illustrative

The building will keep climbing toward its target, limited each year by the 8% cap and the 30% five-year cap, until it catches up or the market value falls below it.

Phase-ins for large buildings and commercial property

Class 2 buildings with more than 10 units and Class 4 properties don’t have a cap. Instead, DOF phases in each change in assessed value at 20% a year over five years. Several phase-ins run at once, one for each year’s change, and DOF taxes you on the lower of the actual assessed value and the transitional (phased-in) value.

Illustrative example: if a building’s actual assessed value rises by $100,000 this year, only $20,000 shows up in this year’s transitional value. Another $20,000 arrives in each of the next four years. If last year’s increase is also still phasing in, a flat or falling market this year can still mean a higher transitional value, and a higher bill.

Why your taxes went up when your value went down

• You’re catching up to a cap. If your capped assessed value is below the 6% or 45% target, it keeps rising until it gets there.
• Earlier increases are still phasing in on large co-ops, condos and rentals.
• The tax rate changed. The City Council sets class rates each year.
• An exemption or abatement ended or shrank, such as an expiring 421-a or J-51 benefit, or a lapsed senior exemption.
• Physical changes such as new construction or an alteration: on phased-in properties, DOF adds their value in full rather than over five years.

Citywide, DOF’s FY2027 tentative roll showed Class 1 market value up 5.2% and assessed value up 4.7%, and Class 2 market value up 6.9% with assessed value up 6.2%. Your property can move very differently from those averages.

Effective market value: the number to beat in an appeal

When caps hold your assessed value down, your notice may show an effective market value. It’s the capped assessed value divided by the assessment level: ÷ 6% for Class 1, or ÷ 45% for Classes 2a, 2b and 2c. In DOF’s Year 3 example, $6,741 ÷ 6% = $112,350, much lower than the $140,000 market value.

What to check on your notice

1. Tax class. Is it right for the number of units? See tax classes 1–4.
2. Building description. Square footage, units, year built. Factual errors can be fixed with a DOF Request to Update or Request for Review.
3. Market value vs effective market value. If there’s an effective market value, that’s the figure to compare with your evidence.
4. Exemptions. Are the ones you applied for listed?

Then run the numbers in the NYC property tax estimator, or read how your NYC property tax bill is calculated for the full chain from assessed value to tax. Look up any building on Roofy’s NYC lookup. This is general information; your Notice of Property Value is the official record for your property.