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How to Contest a Property Tax Assessment

In Maryland, home property tax assessments work on a three year cycle. Every three years your home is evaluated for property tax purposes and you have that one opportunity to contest the new assessment. The schedule for your area may be different but the process is the same. In another year or so, it’ll be our turn to be reassessed and we’re hoping that lowered home prices means lower property taxes.

Maryland also has a Homestead Tax Credit that caps the year over year increase of assessment value to 2-10% (depends on the county). Anything above 10% each year is given as a tax credit so that your cost doesn’t increase more than 2-10% a year. You have to be the owner of the property and live in it as your principal residence to qualify.

So every three years you get the opportunity to contest the property tax assessment and here’s a scenario in which you want your home value to go down. The cheaper they assess your property, the fewer dollars you pay in property taxes. It may make you feel good to learn your home’s value has increased but it hurts your wallet! The only solution is to contest their assessment and here’s how.

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Maryland Homestead Tax Credit Application

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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