How NYC property tax is shifting across the four tax classes — and what 421-a expirations mean for owners.
NYC property tax is calculated separately for each of four tax classes:
Effective tax rate (ETR = total tax / market value) reveals how much each class actually pays once the formula compresses through assessment ratios and caps. Class 1 has the lowest ETR (often under 1%) because the 6% assessment ratio combined with the cap suppresses assessed value relative to market. Class 4 (commercial) has the highest ETR — closer to 4.5% — because there is no cap and the full 45% ratio applies.
The 421-a program (now lapsed under that name and replaced by 485-x) provided 10–35 year tax exemptions for new residential construction. Tens of thousands of units begin transitioning from full exemption into the post-benefit phase between 2026 and 2030. Owners holding 421-a properties through expiration face stepped tax increases — building underwriting from acquisitions made in the last decade should re-test against post-benefit tax burden.
The largest exemptions and abatements by participation count are STAR/Enhanced STAR (basic owner-occupied), SCHE (senior), DHE (disabled), and J-51 (residential renovations). 421-a/485-x and ICAP (commercial) are the largest by total dollar value.
The Tax Commission filing window for assessment challenges closes March 1 (Class 1) / March 1 (other classes). With market values flat or down in some segments while assessed values continue catching up under the cap formula, 2026 is a high-leverage year for filing protests.
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