NYC Property Tax Classes for Rental Owners

In New York City, a building with one to three units is generally in tax class 1, and a residential rental with four or more units is in tax class 2, so a 4-unit building is assessed at 45% of its DOF market value while a 2-family is assessed at 6%. The two classes also use different tax rates, different valuation methods and different caps on how fast the assessment can rise.

This guide explains each class that matters to small rental owners, how the caps and phase-ins work, how to read the Notice of Property Value (NOPV) you get every January, and how to challenge it. Everything here comes from the NYC Department of Finance (DOF) and the NYC Tax Commission.

The tax classes, as DOF defines them

Class 3 is most utility property and rarely matters to landlords. If you own a single unit in a larger condo building, your unit is in the building’s class (2 or 2c), not class 1.

Why a 4-unit is taxed so differently from a 2-family

1. Different valuation method

For class 1, DOF uses statistical models of sales of similar properties in your neighborhood over the prior three years. For class 2, state law requires DOF to value the property as income-producing, based on income and expenses: DOF models typical income and expenses for similar buildings and applies a formula. Co-ops and condos are valued as if they were rental buildings. So the “market value” on a class 2 NOPV is an income-based figure and can be well below what the building would sell for.

2. Different assessment ratio and rate

Assessed value is 6% of market value in class 1 and 45% in class 2. Then a different rate applies to each class. Multiply the two and you get the share of DOF’s market value you pay each year before exemptions or abatements:

That gap is why the comparison is only fair once you remember point 1: the class 2 market value is built from rental income, not sale prices, and caps keep many buildings’ assessed values below the full 45%. To see what you actually pay, look at the taxable value on your own NOPV, or estimate it with the NYC property tax estimator.

3. Different caps

State law limits how fast assessed value can rise in class 1 (6% a year, 20% over five years) and in classes 2a, 2b and 2c (8% a year, 30% over five years). For larger class 2 buildings (11+ units) and class 4, there is no cap; instead, increases are phased in at 20% a year over five years as a transitional assessed value. DOF notes that increases from physical changes, such as an addition, are not phased in.

From market value to your bill

1. 1

   Market value

   DOF estimates it (sales for class 1, income for class 2).
2. 2

   Assessed value

   6% or 45% of market value, limited by caps (class 1, 2a/2b/2c) or phased in (class 2 with 11+ units).
3. 3

   Taxable value

   The lower of actual or transitional assessed value, minus exemptions such as J-51 or 421-a exemptions, STAR or SCHE.
4. 4

   Tax

   Taxable value times the class tax rate, then minus abatements, which reduce the tax itself.

Reading your Notice of Property Value

DOF issues the NOPV in mid-January, with the tentative assessment roll. It shows the tentative market value, assessed value, exemptions and tax class for the tax year that starts the following July 1. DOF released the fiscal year 2027 tentative roll on January 15, 2026, and reported that total class 2 market value rose 6.9% citywide, with rental buildings up 6.4% and Brooklyn rentals up 12.0%. Check three things on yours:

• Tax class and unit count. A 3-family wrongly listed as 4 units moves from class 1 to 2a, a large change.
• Building description. Square footage, units, year built and building class drive the model.
• Exemptions and abatements. Make sure benefits you are owed (and their end dates) appear. See 421-a expirations and J-51.

How to challenge the assessment

There are two separate routes, and they do different things.

DOF says a Request for Review is not a substitute for a Tax Commission appeal. If you think your value is too high, file with the Tax Commission. Its forms by property type:

• TC108: value claims for all class 1 properties.
• TC101: value claims for class 2 or 4 properties, other than condo units.
• TC109: value claims for condo units in class 2 or 4.
• TC106: tax class claims and certain exemptions (such as J-51 and 421-a); it must also include any value claim.

Income-producing properties must also file an income and expense statement (TC201 for rental properties), and an accountant’s statement (TC309) is required if the assessed value is $5 million or more. The deadline for a tax class change is based on the class shown on your NOPV, not the one you are asking for. If DOF sends a revised notice dated after February 1 that increases your assessment or reduces an exemption, you have 20 calendar days from its date.

A typical year

1. Mid-January

   NOPV and tentative roll

   Review class, description, value and exemptions.

2. March 1 (classes 2–4) / March 15 (class 1)

   Tax Commission appeal deadline

   The exact dates can move a day or two; FY27 dates were March 2 and March 16, 2026.

3. April 1

   DOF Request for Review deadline (classes 2–4)

   March 15 for class 1.

4. May

   Final assessment roll

   DOF’s calendar listed May 25, 2026 for the FY27 final roll.

5. June

   Tax bills generated

   For the tax year starting July 1.

Related reading

For the basics of each class from a homeowner’s side, see NYC property tax classes 1–4 and Market value vs assessed value. For the appeal itself, see How to appeal your NYC property assessment. Thinking about buying a small building? Buying a two- to four-family house in NYC covers the jump from 3 to 4 units. This page is general information, not tax or legal advice.