Property Taxes in New York

The New York State Department of Taxation and Finance, Office of Real Property Tax Services does a good job in explaining how property taxes work. In New York State, there is no personal property tax. Personal property taxes are taxes on personal items like cars and jewelry. In New York State, the real property tax is a tax based on the real property value. New York State depends on property taxes as income to run its counties, cities, towns, villages, school districts, and special districts. The money funds schools, courts, police, and roads.  Without tax income, a municipality can go bankrupt, or have to depend on neighboring towns for public services, such as fire protection.

The amount of a real property’s tax bill is based on the (1) property’s taxable assessment and (2) tax rates of the taxing jurisdictions where the property is located. The assessor assesses property based on the property market value less any applicable property tax exemptions. The tax rate is based on a spending budget from the jurisdiction.  The budget depends on how much money a jurisdiction needs to spend on public services, and sources of revenue other than property taxes.

The market value is based on the sales price for similar real property in the area.  When a person buys property at a high market price, and then the property value in the area declines, the property owner may ask for a reassessment so the property taxes are based on roughly the price for which the owner could sell the property.  Owners of real property of equal value should pay the same amount in property taxes, regardless of how much money they earn or spend.

When a real property changes ownership, the property may be assessed again.  Because the assessment is based on the sales price, someone who bids up a sales price in a real estate purchase may end up paying more property taxes.  Besides a property sale, change in ownership may occur when there is a transfer of a present interest in real property, including beneficial use, or value which is substantially equal to the value of a fee interest.

For property tax purposes, there is no change in ownership when a person creates a living trust, names him/herself as trustee, and funds the trust with real property. A present interest does not include a contingent interest in a revocable trust because no present interest transfers. When a revocable trust becomes irrevocable, change in ownership occurs as of date the trust becomes irrevocable.  Beneficial use does not include a bank with a security interest, or trustee who holds legal title only.  A lengthy leasehold interest, including renewal options, is considered substantially equivalent to fee value.

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