What is the Residential Split Tax Rate?
The Residential Split Tax Rate is a new split rate that taxes residential properties at different rates if they are assessed at over $2.5M. The first $2,500,000 is taxed at $0.85 and anything over is taxed at $1.00.
What is the difference between 1A and 1B?
Historically there were 2 property class types; Class 1 for residential and Class 2 for commercial. The new Residential Split Tax only applies to residential accounts with 2 or less units on a single lot, so new classes needed to be created.
1A is any account with 3 or more units (apartments, triplex, etc.).
1B is any account with 2 or less units (single family detached, row house, townhouses and houses with a second living unit (row house with converted English Basement, detached house with separate living area in the back, etc.)
1A is any account with 3 or more units (apartments, triplex, etc.).
1B is any account with 2 or less units (single family detached, row house, townhouses and houses with a second living unit (row house with converted English Basement, detached house with separate living area in the back, etc.)
Are all class 1B accounts taxed at the higher rate?
No. Only about 2% of the properties in class 1B are assessed above $2,500,000 and are taxed at the higher rate. Just because you are a 1B does not mean you are paying more in taxes.
How are the taxes calculated?
1A: Regardless of the assessed value, you divide the assessed value by 100 then multiply by 0.85 (sample property assessed at $2,600,190: (2,600,190/100) x 0.85 = $22,101.62 annual tax.)
1B: Anything assessed at less than $2,500,000, you divide the assessed value by 100 then multiply by 0.85 (sample property assessed at $851,760: (851,760/100) x 0.85 = $7,239.96 annual tax).
1B: Anything assessed at more that $2,500,000, the first $2,500,000 is taxed at $0.85 and everything over is taxed at $1.00. (sample property assessed at $7,880,380: (2,500,000/100) x 0.85 = $21,250 plus (5,380,380/100) x 1 = $53,803.80 for a total annual tax of $75,053.80).
1B: Anything assessed at less than $2,500,000, you divide the assessed value by 100 then multiply by 0.85 (sample property assessed at $851,760: (851,760/100) x 0.85 = $7,239.96 annual tax).
1B: Anything assessed at more that $2,500,000, the first $2,500,000 is taxed at $0.85 and everything over is taxed at $1.00. (sample property assessed at $7,880,380: (2,500,000/100) x 0.85 = $21,250 plus (5,380,380/100) x 1 = $53,803.80 for a total annual tax of $75,053.80).
What if I don’t want to be a 1B?
If you have a property that is a single unit or a property with an additional unit, you are a 1B. This can’t be changed. Again, just because you are a 1B doesn’t mean you are paying more in taxes. You only pay the higher rate on anything above $2,500,000.
Will the threshold ever change from $2,500,000?
Yes. The law does allow for changes to this threshold. This changes is based on the CPI (Consumer Price Index).
Can tax relief apply to both classifications, 1A and 1B?
Yes. Through the application process, if requirements are met, both 1A and 1B classifications are eligible for various tax relief programs, such as Homestead Deduction, Assessment Cap Credit, and Senior or Disabled Tax Relief.