Eric T. Vallone, Esq. - 5/25/17 on Property Tax

What is property tax? A tax based on the value of real property. New York does not have personal property taxes.

Who assess property taxes? Counties, cities, villages, towns, school districts, special tax districts, etc.

What do these governmental entities use property taxes for? Schools, police fire, roads, garbage, water, sewer, and other municipal services.

How is property tax determined? Two factors:

1. Taxable assessment

2. Tax Rate

All real property in a assessing unit (town, city, school district, etc.) is assessed (or given a value). However, not all real property is taxable. Churches, governmental buildings or land, and some businesses do no pay property taxes (tax breaks to convince a company to move into an area). Many homeowners have partial exemptions on their property taxes, such as veterans and owner-occupiers that qualify for the School Tax Relief (STAR) program.

How is the assessment determined? The assessment is based on the fair market value of the property, or what it would sell for between a willing buyer and a willing seller. Other methods of value include using the depreciated cost of materials and labor required to replace the property. Commercial property is sometimes valued based on its income producing potential. Some properties are not being used for their optimal value. These properties are usually assessed at their current use value. I.E. using commercial space as a warehouse versus a shopping plaza or office park. The assessment is completed by the tax assessor, which is an appointed or elected position of the governmental entity that is doing the taxing.

Once the assessment is done for every piece of property in a governmental unit, it's given an equalization rate, which is the rate used to tax the property. That is the same for every property, and is between 1 percent and 100 percent. You multiply the fair market value by the equalization rate then subtract any applicable exemptions to determine the taxable assessed value of that property.

How does the assessed value relate to the amount of taxes a property owner pays? The assessed value is multiplied by the tax rate to come up with the tax bill for a piece of property.

How is the tax rate established? The tax rate is set based on the tax levy required by the governmental entity.

How is the tax levy determined? The governmental entity develops and adopts a budget. Revenue from all other sources (fees, etc.) is calculated or estimated and subtracted from the budget. The remainder is the tax levy, or the amount of revenue that the government will raise from property taxes.

Ok, I know my assessment and the tax rate, now what do I owe? Let's say town Synergy has $40,000,000.00 in taxable assessed value, and a $2,000,000.00 tax levy. Gunning owns a house that's worth $100,000.00. Synergy taxes at 15 percent of value, so Gunning's house has a $15,000.00 assessment. The tax rate is determined by dividing the tax levy by the taxable assessed value, so Synergy's tax rate is 0.050 percent, or $50.00 for every $1,000.00 of assessed value. That means Gunning pays $750.00 for property taxes.

Let's say that Synergy instead taxes at 100 percent of value. What changes? The taxable assessed value would now be $266,666,666.67. The assessment remains the same at $2,000,000.00. We work the formula and the rate changes to 0.0075 percent. We multiply that by $100,000.00 and get $750.00.

What if my property is assessed for more than its worth? Each year, the assessor files the tentative tax roll. Usually, this happens on May 1st, but you can check with the assessor for the actual date. Any questions about the assessment can be discussed informally with the assessor before that year's tentative tax roll comes out. The assessor will discuss the assessment and the rationale behind it with you. Your tax bill will have the full value of your property, the assessed value, and the equalization rate.

Remember that the assessment is just one piece of the puzzle. If it's correct, there's not much you can do to change your tax bill. If it's too high, you can as for a formal review.

There are two levels:

1. Administrative review -- a grievance process conducted at the municipal level

2. Judicial review -- A. Small Claims Assessment Review B. Tax certiorari proceedings in State Supreme Court

Usually, grievance day is the 4th Tuesday in May. You will need evidence to prove what the market value of your property is, I.E. appraisal, recent sale, etc. Sales comparison -- comps.

Sometimes, your property will be assessed at fair market value, but your neighbors will be under assessed. This should be discussed with the assessor.