Basics: Three Family Versus Four Family Taxes
There was a discussion on the Harlem Home bulletin board this weekend about the taxes on 4-family versus 3-family homes. The bottom line: Taxes are calculated on a property’s assessed value, not its market value. The assessed value of a 4-family is calculated by taking 45% of the market value while a 3-family is based…
There was a discussion on the Harlem Home bulletin board this weekend about the taxes on 4-family versus 3-family homes. The bottom line: Taxes are calculated on a property’s assessed value, not its market value. The assessed value of a 4-family is calculated by taking 45% of the market value while a 3-family is based on 6% of market value. Pretty good reason to combine a unit or two–even if it means a reduction in rental income.
I think your statement is somewhat misleading..
“The assessed value of a 4-family is calculated by taking 45% of the market value while a 3-family is based on 6% of market value.”
Most residential property of up to three units (one-, two-, and three-family homes and
small stores or offices with one or two apartments attached) are tax Class 1. The assessment ratio for Class 1 properties is 6% of market value.
All other property that are primarily residential, such as cooperatives and condominiums are tax Class 2. The assessment ratio for Class 2 properties is USUALLY 45% of market value. Class 2 is subdived based on Building Code into: 2, 2A, 2B.
-Over six families without stores is Building Code C1 and tax class 2.
-Five to six families is Building Code C2 and tax class 2A. Four family is Buildin Code C3 and tax class 2A.
-Old law tenaments are Building Code C4 and tax class 2B.
I spent some time going through the NYCProperty Assesment site looking at the tax class for properties in FG/CH. The majority of homes in this area are tax Class 1; 1-3 family homes.
There are several 2, 2A and 2B properties in FG/CH. From what I could confirm Tax class 2 properties are assessed at 45% of market value. These are properties that are 6 families or more.
The 2A and 2B properties are a bit more difficult to figure out. For 2A properties, it looks like the building code is factored in. From the records it looks like properties with building code C3,four families, are assessed at rates similar to tax class 1 properties. I personally own a C3 property. My assessed value is under 8%. From what I can figure out, C2 and C4 buildings, Five to six families and Old law tenaments are assessed anywhere between 15% and 25% of market value.
All of this is very confusing. However to simplfy.. 6 family properties have the highest tax burden @ 45% of market value. 5-6 family properties have a moderate tax burden @ 15-25% of market value. The tax burden on a 4 family property is less than 8%(my personal experience) vs 6% for 3 family.
Homebuyers can not obtain owner-occupied mortgages on properties over 4 families. Anything over 4 families is viewed as investment property and different underwriting guidelines are applied.
So for the sake of discussion, I would not discourage a homebuyer away from a 4-family property simply to avoid taxes. The difference in property tax is minor in comparison to the additonal income. If anything, you might even be in a position of having to pay higher income taxes(due to increased rental income).