New York City's Property Taxes Are Not the Nation's Highest

New Yorkers, rejoice! New Jersey and Illinois have even higher property tax rates, according to new data released by the U.S. Census Bureau, and consequently residents in those two states tend to pay the most in property taxes relative to home values.

In New York City, where decades of promised property-tax reform have produced paltry results, the effective tax rate is barely half the national median – but city homeowners pay some of the biggest tax bills in the nation because of high local real estate values.

A breakdown of the data by the real estate blog roofline.com reveals that the median property taxes paid last year by New York City residents was $5,633 compared to the national median of $2,578. Residents of three cities had stiffer tax bills: Elizabeth, N.J. (nearly $9,000); San Francisco ($7,678); and Austin, Tex., ($6,616). Adding to the sting was the Trump administration’s tax bill, which, beginning in 2018, began limiting the amount of state and local taxes that can be deducted against federal income taxes. As a result, living in expensive, high-tax states such as New York, New Jersey and Illinois became even more expensive. The typical New Jersey homeowner paid a whopping $8,432 in property taxes last year, the highest in the country.

While property taxes are levied in different ways based on local and state laws, a helpful way to compare tax burdens across locations is to calculate an effective property tax rate by dividing the total property taxes paid by the aggregate value of homes in a given area. By this measure, New York City’s effective tax rate of .61%, is, impressively, a little more than half the national median of 1.03%.

Census Bureau data shows that in aggregate, property taxes are the biggest source of tax revenue for state and local governments. Nationally, state and local property taxes totaled $617 billion in 2019, or 39% of total state and local government tax revenue. Property tax revenue amounted to $159 billion more than the next largest state and local government tax revenue source, individual income taxes.

The coronavirus pandemic has eroded much of state and local governments’ income from real estate sources, including transfer taxes when real estate changes hands. In New York City, for example, there has been an uptick in investment and residential sales in the past month, but the drop-off in revenue from transfer taxes so far this year has reached $1.4 billion, according to a new report from the Real Estate Board of New York.