If you are in the midst of deciding between a condo or co-op, it is important to weigh a variety of factors between each property- one of those factors being taxes.
Understanding condo vs. co-op taxes may help you narrow down which type of home makes the most sense for you.
How Taxes for Condos Work
While property tax is imposed the same way on condos and co-ops, the difference comes down to how the taxes are paid.
When purchasing a condo, you are gaining title to a single unit. This means that you own everything within the walls of your unit. Everything outside of the unit, known as the common areas, is shared and owned by all of the condo owners collectively.
Due to the nature of condo ownership, owners are expected to pay separate and individual property taxes on their unit directly to the city.
Since condo owners pay the mortgage directly to their lender, the purchase of a condo is known as a “fee-simple” purchase.
How Taxes for Co-Ops Work
Unlike condo ownership, obtaining a co-op involves purchasing shares to a corporation which owns the co-op building, rather than gaining title over an individual unit.
Because of this difference in ownership, co-op taxes are payable on the entire building as one entity. Then that cost is allocated based on the percentage interest of the co-op owners through maintenance fees.
For example, if a co-op shareholder owns 15 percent of the corporation, then they are responsible for paying 15 percent of the building’s assessed property taxes.
Factors that Can Affect Your Cost
The cost of property taxes for both condos and co-ops are dependent on the mill levy and the assessed value of your property.
The mill levy is simply the tax rate imposed on your property value and varies depending on the tax jurisdiction.
The assessed value of your property is an annual estimation of the reasonable market value of your condo or co-op based upon local real estate conditions. These conditions may include factors such as the selling price of similar properties in the area, replacement costs for the property, and maintenance costs for the property owner. Market Value is depended on factors such as the size and location of a property.
Multiply the mill levy by the assessed value to determine the property tax for your home.
Generally, condo owners can often expect higher property taxes due to a higher market value. Condominiums are commonly newer, larger, and feature more amenities than co-ops, hence the higher market value and property taxes.
With more insight into condo vs. co-op maintenance fees, we hope you can feel more confident in choosing the right property type for you!