Is Maryland “Pick Pocketing” your Homestead Tax Credit?
January 11th, 2008 Categories: Maryland Real Estate News
ALERT: If your home in Maryland is scheduled for reassessment in January of 2008 then you need to take immediate action. For all others, your time is coming so read up now!
Another unfavorable result of the Maryland General Assembly’s Special Session was the requirement for home owners to re-apply for their Homestead Tax Credits. Letting this slip by you could cause a spike in your tax rates.
What’s worse is that the change has gone widely un-noticed by taxpayers since the notice was buried behind your most recent assessment.
This article will shed some light on what’s happening and give direction as to what you can do to keep Maryland’s hands out of your back pocket.
What are the Maryland Homestead Tax Credits?
The Homestead Tax Credits were established by both the State of Maryland and various Counties in order to cap the annual increases in taxable assessments for owner occupied residential properties. In particular, county property tax increases are limited to 5%/year and State property taxes are limited to 10%. If you don’t qualify for the Homestead Tax Credit then there are no limits in the increase year over year and your increases will not be capped. My chart below demonstrates the effects of the cap.
Why do I have to re-apply for the Homestead Tax Credit?
In order to capture additional revenues from property owners who are receiving the tax treatment when they should not, the state has instituted this new law. For instance, vacation homes and rental properties in the state of Maryland are not eligible to receive the tax credit.
Who is eligible for the Homestead Tax Credit?
The tax credit will be granted if the following conditions are met during the previous tax year:
- The property was not transferred to new ownership.
- There was no change in the zoning classification requested by the homeowner resulting in an increase value of the property.
- A substantial change did not occur in the use of the property.
- The previous assessment was not clearly erroneous.
A further condition is that the dwelling must be the owner’s principal residence and the owner must have lived in it for at least six months of the year, including July 1 of the year for which the credit is applicable, unless the owner was temporarily unable to do so by reason of illness or need of special care. An owner can receive a credit only on one property—the principal residence.
How to re-apply for the Maryland Homestead Tax Credit
To determine eligibility and to re-apply for the credit I have compiled a list of resources for you
- Apply Online for the Maryland Homestead Tax Credit
- Maryland State Department of Assessments and Taxation
- A letter from the Director of SDAT
- A Baltimore Sun article about the Homestead Tax Credit
On another note, you may have noticed that your property value on the assessment is quite high and similar homes aren’t selling that high and you would like to make a property tax appeal. If this is the case, I will gladly assist you by sending comparable sales data to you free of charge.
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Good stuff Scott. You gotta watch out for the stuff hidden inside government legislation.
Comment by Dothan Real Estate, Charles Woodall — January 21, 2008 #
I see that you quoted, “Another unfavorable result of the Maryland General Assembly’s Special Session was the requirement for home owners to re-apply for their Homestead Tax Credits.” This was not a result of the special session, but a bill signed into law following the 2007 regular session.
Comment by correct lee — April 16, 2008 #
Thanks Lee for reading my post and catching that error. The Maryland General Assembly is just so busy passing tax increases that it’s hard to keep up with what is going on. Seems like that’s what they are counting on huh….
Comment by Scott Saghirian — April 17, 2008 #
Real estate agents have been aware for several years that many investors have been fradulently claiming the homestead tax credit when purchasing property. When a process to enforce the law and end the fraud is established the people who benefitted from the fraud cry foul. Unbelievable!
Comment by Bob Catlin — May 29, 2008 #
Thanks Bob for your post and comment. The topic of the Maryland Homestead Tax Credit has caused great confusion and concern for home owners and real estate professionals alike.
I don’t know why you single out real estate agents in your comment though. My post was alerting those who legitimately receive the tax that if they don’t re-apply they may lose the tax credit. What’s wrong with that? Do you like to pay more tax than you have to?
Real estate agents are tax payers too, so we benefit when the state of Maryland brings in the tax they budget for. That way they don’t have to over tax decent hard working people. Anybody paying attention to the news can see that Maryland is becoming more and more taxing as the years go by. To say a real estate agent benefits from fraud is absolutely wrong.
Lastly, a real estate agent has no authority to give tax advice so anybody committing tax fraud does that on their own. And they are responsible for it.
Thanks again for the comment.
Comment by Scott Saghirian — May 29, 2008 #
Hi Scott,
Thank you for the article on the Maryland Homestead Tax Credit. I must disagree with the comments made by Bob. My husband and I are by no means “real estate investors” or wealthy but we were able to purchase 3 rental properties in Baltimore in 2006 and 2007. Having moved to Maryland in 2001 I didn’t know anything about the Homestead Tax Credit law. When we purchased the properties and went to closing it was never mentioned so there was no intentional fraud on anyone’s behalf. In 2006 and 2007 I now know that we received the “tax” credit or I am assuming that we received the tax credit erroneously. This year we sent in the application for our primary residence only and we received our tax bills for the rental properties and they have quadrupled (plus) in cost. Your article states that there is no limit and no yearly cap on the taxes for a non-primary residence so as the market improves (hopefully soon) we will be selling. With the increase in taxes, BGE, water etc, there truly is no profit in the rentals. Thank you for the article!
Comment by Bridge1 — July 4, 2008 #
This is a question rather than a comment. Is it true that the legislature is drafting legislation to eliminate the Homestead tax credit alltogether? On the Tom Marr show this morning, hosted by Pat Macdungha, Pat suggested that this is exactly what is happening. How can one find out the bills that are being offered and what the particulars are. Any thoughts or advice!
Kevin
Comment by Kevin — July 9, 2008 #