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Maryland Homestead Tax Credit Application
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This article applies only to Maryland residents, though other states may institute policies such as this one as property tax revenues start to fall because of the housing slump.
In Maryland, we have a Homestead Tax Credit that “limits the amount of assessment increase on which an eligible resident homeowner actually pays county, municipal and State property taxes each year.” This protects people from huge spikes in property taxes every three year assessment cycle. When we bought our home three years ago, we didn’t immediately begin paying taxes on our assessed value (the purchase price). The assessment value gets slowly phased in, 10% for State assessments each year, until it reaches the total assessed value.
Two years ago, the Maryland General Assembly enacted legislation that would require homeowners to submit a one-time application for the Homestead Tax Credit. This checks that each family receiving the Homestead Tax Credit was actually supposed to receive it. You’re supposed to only receive it once, on your principal residence, per person or married couple. They check primary residence by confirming income tax and motor vehicle record in the state. This is to prevent people from claiming the credit on second homes or rental properties, for which this law was never designed for.
Well, our three year assessment cycle came due and we had to re-apply. The process took two minutes and will save me the county and state taxes on $108,943 of my assessment. Translate that into taxes and you’re talking close to $3,000 a year! I don’t think there’s a single action in the world that has an ROI like that!
Maryland produced this straightforward Homestead Tax Credit FAQ but it’s pretty clearly laid out in the assessment notice they send you. You don’t need to apply until they send you your assessment but you can do everything via their online form. You will need the paper application form so you can get your Real Property Account # and an Access Number.
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Los Angeles exempts a bit of the value from the assessment if the house is owner occupied. But the policy must date from the 60′s cause the exemption is only $7,000! So on a $500,000 house you are only taxed on $493,000 – yeah it doesn’t amount to much. But we also have prop 13, which limits annual increases to 2%. If you’ve owned a home forever you are paying almost nothing in property taxes, I pay 3 times the tax my neighbor pays and my house is only 1/4 the size of his. I better get a reduction this year, my property is worth $100,000 less than I paid.
Thanks! I’m passing this along to my sister in Frederick.
This is great advice. I would mention two things here:
1. The assessed value and the purchase price are really two different things. The purchase price is agreed upon between the buyer and seller and, for purposes of the mortgage, validated through an appraisal ordered by the mortgage company to substantiate the collateral interest held by the mortgage company. In MD the assessed value and the market value are supposed to be close but often they are not which is how people can justifiably appeal the assessments that come around every three years.
2. New owners (i.e., buyers of real estate even for primary residences) don’t enjoy the Homestead Tax Credit until they’ve lived in the property for the first year. Depending on which County you purchase in it can be a real eye opener to see that your first year of taxes can be substantially higher than the person from whom you bought the house. In fact, in Montgomery County, MD it’s so substantial that you must disclose, by County law, the new owners’ tax exposure in all marketing and advertising for homes in the County (this hasn’t gone Statewide…yet).
On last thing, most of the time this application for the Homestead Tax Credit is slipped into you tax assessment notice which most people just skim and toss…without realizing they really need to fill out the application and send it back into the State.
So, KUDOS, Jim, for pointing this out and linking to the online form people.
I am going to have to check this out. I also live in Maryland.
Wish every state had this tax break.
I just bought my first home and I have only been living in my home for a little over 3 months now. I received an application in the mail about the Maryland Homestead Tax Credit when we first bought our house. I filled out the application online. We also just received our house assessment and it was way less that what our house was appraised for when we bought it a few months. I’m not sure if this helped my assessment, but I was pleased it was so low
Why are renters excluded? If I rent a house or apartment, why shouldn’t I get the same protection from huge spikes in property values?
I bought a home the ending of Nov 2008. I agreed that it will be my primary residence, but I haven’t moved in yet. I’m still fixing up the place and plan to move in by no later than May of 2009. Am I eligible for the tax credit? I’m not renting out my home nor is it used as a vacation home, it’s just vacant.
Does the credit come when you pay at tax time or does it come as a decrease in your property taxes?
poor boomer,
Renters don’t pay property taxes – only the owner of the property.