FY24 Property Taxes
Property taxes continue to represent the City’s largest and most dependable source of revenue. In FY24, the budgeted net property tax levy totals $3.10 billion, providing 72.4% of the City's revenue.
Thanks to a surging economy in the pre-pandemic period, strong recovery, and strategic development policies, property values in Boston have risen steadily. In FY22, property values increased by $7.2 billion (3.8%), and $14.4 billion (7.3%) in FY23, currently totaling $212.2 billion.
While the Boston real estate market has demonstrated considerable resilience in the face of the pandemic, the City continues to monitor the lingering effects on property values.
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Tax Share and the Tax Rate
In FY23, residential tax payers account for 42% of the total tax levy. Commercial, industrial, and personal property account for the remaining 58%.
Classifying properties by residential, commercial, and industrial categories reduces the residential tax rate, the rate per thousand dollars of property value, to the lowest level allowed by law. Without it, residential taxpayers would see their properties taxed at a much higher rate. As can be seen in the graph to the right:
- Rates increased in the years following the Great Recession (FY08-FY13), when property values decreased significantly due to the sudden collapse of the housing market.
- Starting in FY14, rates decreased for several years thanks to increased development and the recovery of the economy, and since FY18, they have moved within a narrow range.
- In FY23, the residential tax rate is $10.74 for every one thousand dollars of value. Commercial, industrial, and personal rates are $24.68 for every one thousand dollars.
Property Tax Rates
Proposition 2 1/2
Property Tax Levy and Levy Ceiling
Due to years of strong new growth increases, the City's FY23 net effective tax rate of 1.4% is well below the tax levy ceiling of 2.5% of total assessed values.
Proposition 2 ½ was enacted in 1980 by voter initiative to constrain and limit the annual property tax levy in Massachusetts cities and towns. The law includes two types of limits:
- The Levy Limit - Each year, the City can raise its tax levy by up to 2.5% over the previous year’s levy limit. New growth, which represents additions to the City’s tax base over the previous year, is added to the levy as well.
- The Levy Ceiling - The tax levy cannot exceed 2.5% of the total assessed value of all real and personal properties in the City.
To learn more about tax collection and assessments in Boston, please use the following resources:
Property Tax Levy Increase by Type
Property tax growth from new growth has exceeded growth from the allowable 2.5% increase in 14 of the last 20 years.
During the last six years, the City saw notable construction projects in Boston enter the City property tax base for commercial, mixed-use, and residential properties. According to the Boston Planning & Development Agency (BPDA), the revenue from building permit fees indicates the pipeline of new projects remains strong. This includes $8.2 billion in estimated construction value permitted in FY20, $5.7 billion in FY21, and $7.5 billion in FY22.
In FY24, the City expects new growth of $60 million, a decrease from FY23's actual new growth. This estimate considers economic uncertainty from lagged effects of the pandemic, including recent interest rate hikes by the Federal Reserve. As was observed during the Great Recession, new growth is volatile and depends on the development cycle and the local, state, and national economies.