If you own a home, a condo, or a co-op in New York City, the single most important digit on your tax bill is the tax class. Class 1 and Class 2 cover almost every residential property in the five boroughs, and they are governed by completely different rules. The tax rate is different, the assessment ratio is different, and most importantly, the annual cap on how fast your assessed value can grow is different. The cap is the thing that protects you when the market value of your block doubles. Without it, your bill would double too. This guide walks through what each class actually means in FY2026, how the caps work in plain English, and exactly which form to file and which phone number to call if your Notice of Property Value looks wrong.
The FY2026 Tax Rates, Side by Side
The NYC Banking Commission and City Council set the tax rates each summer for the fiscal year that begins July 1. The official rates for FY2026 (July 1, 2025 through June 30, 2026), published by the NYC Department of Finance, are:
- Class 1: 19.843%
- Class 2: 12.439%
- Class 3: 11.108%
- Class 4: 10.848%
Those numbers look like Class 1 homeowners are getting destroyed and Class 2 condo owners are getting a deal. The opposite is true once you factor in the assessment ratio.
Assessment Ratio: Why Class 1 Has a 20% Rate but a 6% Effective Tax
NYC does not tax your property’s market value directly. It taxes a fraction of it called the assessed value. That fraction is fixed in state law (NY Real Property Tax Law §1805) and is wildly different across classes:
- Class 1 (1–3 family homes, small condos in buildings of 3 stories or fewer): assessed value is 6% of market value.
- Class 2 (4+ unit residential, most co-ops, most condos in buildings over 3 stories): assessed value is 45% of market value.
- Class 3 (utility equipment): 45%.
- Class 4 (commercial / industrial): 45%.
So a Class 1 brownstone worth $1,000,000 has an assessed value of $60,000 and pays roughly $11,906 a year (19.843% of $60,000). A Class 2 condo with the same $1,000,000 market value has an assessed value of $450,000 and pays roughly $55,975 a year (12.439% of $450,000). Same building, same block, same view, very different bill. That is not a bug in the system — it is the system, and it is the reason City Council can publish a 19.843% Class 1 rate without anyone moving to Westchester.
The Class 1 Cap: 6% Per Year, 20% Over Five Years
This is the protection that matters when your neighborhood gentrifies. Under NY RPTL §1805(1), the assessed value of a Class 1 property cannot increase by more than 6% in any one year, and not more than 20% over any five-year period — no matter what happens to the market value. So if you bought your Bed-Stuy two-family for $500,000 in 2018 and a similar house on your block just sold for $2.1 million, the city is allowed to recognize the higher value on paper, but it cannot translate that into a sudden tax shock. Your assessed value crawls up at 6% a year max, and the new market reality gets phased in slowly.
There are two important exceptions homeowners trip over:
- Physical changes are not capped. If you add a third floor or convert a garage into a legal apartment, the new construction value is added on top of the cap. Done correctly with permits, this still shows up on your Notice of Property Value as a separate line.
- A change in tax class resets things. If you convert a 1-family to a 4-family rental, the property may move from Class 1 to Class 2, and the caps that applied yesterday no longer apply.
The Class 2 Cap: It Depends on How Many Units You Have
Class 2 splits into two sub-categories for capping purposes, and this is where most condo and co-op owners get confused:
- Class 2 buildings with 10 units or fewer (Class 2A, 2B, 2C): assessed value cannot rise more than 8% in any one year and not more than 30% over five years. This is the cap that protects most small brownstone co-ops and small condo buildings.
- Class 2 buildings with more than 10 units: no annual cap. Instead, any change in assessed value is phased in over five years using a transitional assessed value — generally 20% of the change per year. This is why your large condo tower tax bill grinds up year after year even when the market is flat: prior years’ increases are still phasing in.
The transitional system is laid out in NY RPTL §1805(3) and is the single biggest reason large-building unit owners feel like their tax bill never matches the market. It is also the reason why a co-op board fighting a 2023 assessment increase in 2026 is still doing something useful — that 2023 jump is still being phased in.
Reading Your Notice of Property Value (NOPV)
Every January, the Department of Finance mails a Notice of Property Value to every property in the city. Your NOPV shows four numbers that matter:
- Market value: what DOF thinks your property could sell for.
- Actual assessed value: the market value times the assessment ratio (6% for Class 1, 45% for Class 2).
- Transitional assessed value: only relevant for Class 2 (over 10 units), Class 3, and Class 4 — it is the phased-in number actually used to compute your bill.
- Taxable assessed value: assessed value minus any exemptions (STAR, SCHE, DHE, veterans, J-51, 421-a, etc.).
If any of those numbers look wrong, you have two separate procedures, and people confuse them constantly.
Two Forms, Two Procedures: RTU and RFR
The Department of Finance offers two distinct ways to challenge a Notice of Property Value, and they are not interchangeable:
- Request to Update (RTU): file this when there is a factual error on your NOPV — wrong number of units, wrong square footage, wrong building class code, wrong number of stories. The RTU does not argue value; it argues facts. Form and filing instructions are at nyc.gov/finance assessment forms.
- Request for Review (RFR): file this when the facts are right but you believe the market value is too high. The deadline is generally March 15 for Class 1 and March 1 for Class 2, 3, and 4. After those dates, your only remaining path is a Tax Commission appeal (Form TC101 / TC108 / TC109 / TC106) by mid-March, and after that, an Article 7 court petition.
If you miss both the RFR window and the Tax Commission window, you live with the assessment for the year. There is no back-channel.
RPIE: The Form Income-Producing Owners Cannot Skip
If you own a Class 2 building with rental income, or any Class 4 commercial property with an actual assessed value over $40,000 on the FY2026 tentative roll, you must file a Real Property Income and Expense (RPIE) statement or a claim of exclusion. The RPIE-2025 deadline is June 1, 2026. The filing covers the calendar year January 1, 2025 through December 31, 2025. Most filers use the SmartFile electronic application; the deadline to request a paper waiver passed on May 4, 2026, so for FY2026 the e-file door is the only door left open.
Failure to file is not a small penalty. DOF can impose a fine of 3% of your actual assessed value, and chronic non-filers can be hit with a 5% penalty plus interest. Worse, you lose the right to challenge that year’s assessment at the Tax Commission. If you own income-producing property, the calendar entry of “RPIE due June 1” is the single most important date of the year.
Quick Bill Sanity Check You Can Do Tonight
Pull your last quarterly bill and verify three things:
- Class digit: in the top right corner, look for a 1, 2, 3, or 4. Confirm it matches your property type using the definitions above.
- Year-over-year jump: compare this year’s assessed value to last year’s. If you are Class 1 and it rose more than 6%, something is wrong — either a physical change was added or the cap was misapplied. If you are Class 2 with 10 units or fewer and it rose more than 8%, same thing.
- Exemption line: if you are over 65 with under $98,700 in household income, or disabled, or a veteran, or you own a co-op or condo that may qualify for the Cooperative and Condominium Tax Abatement, those should each show as a separate deduction line. Missing exemptions are the most common source of money left on the table.
Who to Call When the Numbers Do Not Add Up
For property tax questions, the Department of Finance directs all calls through 311. From outside the five boroughs, or using TTY or relay services, call 212-639-9675. DOF’s published direct line for property tax questions is 212-NEW-YORK (212-639-9675) and the assessment unit is reachable through that route. The full contact directory lives at nyc.gov/site/finance/about/contact-us-by-phone.page.
If you have an exemption dispute (SCHE, DHE, STAR, veterans), ask to be routed to the Homeowner Tax Benefits unit. If you have a value dispute, ask for the Assessment Division. They are separate teams and the wait time on a generic 311 hand-off is longer than a direct hand-off.
Frequently Asked Questions
What is the difference between Class 1 and Class 2 in NYC property tax?
Class 1 covers 1-, 2-, and 3-family homes plus small condos in buildings of 3 stories or fewer, assessed at 6% of market value with an FY2026 tax rate of 19.843% and a 6% per year / 20% per five years assessment cap. Class 2 covers larger residential buildings, most co-ops, and most condos in taller buildings, assessed at 45% of market value with an FY2026 tax rate of 12.439% and either an 8% per year / 30% per five years cap (for buildings of 10 units or fewer) or a five-year transitional assessment schedule (for buildings over 10 units).
What are the NYC property tax rates for FY2026?
For fiscal year 2026 (July 1, 2025 through June 30, 2026): Class 1 = 19.843%, Class 2 = 12.439%, Class 3 = 11.108%, Class 4 = 10.848%. These rates are applied to assessed value, not market value, so the effective rate paid by a Class 1 homeowner is closer to 1.19% of market value, and a Class 2 owner is closer to 5.6% of market value.
How do I challenge my NYC property tax assessment?
Two paths: file a Request to Update if there is a factual error on your Notice of Property Value (wrong square footage, wrong unit count), or file a Request for Review if you believe the market value itself is too high. Class 1 deadline is generally March 15; Class 2, 3, and 4 is March 1. After those dates, file a Tax Commission application (TC101, TC108, TC109, or TC106) by the mid-March deadline.
When is the NYC RPIE 2026 deadline?
RPIE-2025 is due June 1, 2026, covering calendar year 2025 income and expense data. Required for income-producing properties with an actual assessed value over $40,000 on the FY2026 tentative roll. Filing is electronic via SmartFile; the paper-waiver deadline passed on May 4, 2026.
What is the Class 1 assessment cap in NYC?
Under NY RPTL §1805(1), the assessed value of a Class 1 property cannot increase by more than 6% in any one year or more than 20% over any five-year period, regardless of how much the market value rises. The cap does not apply to physical changes (new construction, additions) or to a change in tax class.
What phone number reaches the NYC Department of Finance for property tax?
Call 311 from inside NYC. From outside the five boroughs, or for TTY / relay services, call 212-639-9675. Ask to be routed to the Assessment Division for value disputes or the Homeowner Tax Benefits unit for exemption questions.
Tax advice in this article is informational. Consult a tax professional or the NYC Department of Finance for your specific situation.
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