NFCCA

Stories from the NFCCA Newsletter, the “Northwood News”

Northwood News ♦ February 2013

Clearing Up Maryland Homestead Tax Credit Confusion

By Linda Perlman

The Homestead Property Tax Credit is a Maryland state law that limits the increase in the taxable assessment of your principal residence, for property tax purposes, to no more than 10 percent per year.

Here is an example of how the homestead tax credit works.

  1. Assume that your house was reassessed as of 1 January 2013, and that your new phase-in assessment for the first tax year is $400,000 (new value);
  2. Assume that your old assessment (base value), as of 1 January 2010, is $350,000;
  3. A 10 percent increase over the $350,000 base value equals a new taxable assessment of $385,000;
  4. The homestead tax credit would apply to the taxes due on the $15,000 difference between the $400,000 new value and $385,000; and
  5. If the tax rate is $1 per $100 of assessed value, then your homestead tax credit is $150 ($15,000 ÷ 100 × $1).

In 2007, the Maryland General Assembly enacted a law requiring homeowners to submit a one-time application in order to receive the benefit of the homestead tax credit.  Previously, this tax credit was granted automatically if the property was listed in the assessment records as the taxpayer’s principal residence.  The application requirement was instituted because some property owners were improperly receiving this tax credit on rental property and vacation homes.

Most homeowners filed the Homestead Tax Credit application shortly after their property was reassessed (in our area, homes were reassessed as of January 2008 and as of January 2011).  Homestead Tax Credit Eligibility applications were sent to homeowners along with assessment notices and/or could be completed and filed online.  If this was done, then the homeowner does not need to file another application.  You can check the SDAT Real Property database [dat.state.md.us] for your homestead application status.


Since most assessments in the NFCCA area decreased during the last property assessment, there is no homestead tax credit.

If a homeowner failed to file a Homestead Tax Credit Application during this period, then the homeowner was given until 31 December 2012 to submit an application to continue to be eligible for the credit.  If no Homestead Tax Credit Application was submitted by 31 December 2012, then the homeowner loses his or her homestead eligibility and any homestead tax credit on the 1 July 2013 property tax bill.  Any Homestead Tax Credit Application filed after 31 December 2012 will not be approved until the tax year beginning on or after 1 July 2014.

As a practical matter, the homestead tax credit protects against rising assessments and most assessments in the NFCCA area decreased as of 1 January 2011 from the 1 January 2008 property tax assessment.  There is no homestead tax credit when the property value decreases.  For example, my assessment went down as of 1 January 2011, meaning that I did not receive a homestead tax credit on my property tax bill for levy years 2011 and 2012, nor will I receive a homestead tax credit for levy year 2013.  Properties are reassessed on a three-year cycle, so properties in the NFCCA area will be reassessed next year, as of 1 January 2014.  If the assessed value increases, then the increase is phased-in over the next three tax years.

If you occupy your property as your principal residence and you failed to file the one-time Homestead Tax Credit Application, then you can obtain information online (dat.state.md.us, then click on the Homestead Eligibility Application link) or by calling 1.866.650.8783.  Applications filed late will lose their homestead tax credit on the 1 July 2013 tax bill, but will be eligible to receive the tax credit in subsequent years.   ■


   © 2013 NFCCA  [Source: https://nfcca.org/news/nn201302m.html]