The Maryland Homestead Property Tax Credit is a program designed to shield homeowners from sharp increases in property assessments on their primary residence. This credit ensures that taxable assessments on a home do not increase by more than a set percentage each year, as determined by state law. Every county and municipality in Maryland must cap these annual assessment increases at no more than 10%, with many choosing an even lower percentage.
How the Credit Works
While the Homestead Credit doesn’t limit the market value of your home as assessed by the Department of Assessments and Taxation, it does cap the taxable amount. Essentially, homeowners won’t pay property taxes on the portion of the assessment that exceeds the set cap. For state taxes, this cap is fixed at 10%, and for local taxes, the cap varies by jurisdiction but is never higher than 10%.
Example Calculation: If your home’s previous assessment was $100,000 and the new phased-in assessment is $120,000, the taxable assessment would only increase by 10% to $110,000. The Homestead Credit would then apply to the taxes owed on the $10,000 difference. If the tax rate is $1.04 per $100 of assessed value, the tax credit would amount to $104.
Eligibility and Application Process
To prevent misuse, homeowners must submit a one-time application to confirm their eligibility for the credit. This ensures the program benefits only those who own and occupy the property as their principal residence.
You can check the status of your Homestead Credit eligibility by visiting the Maryland Real Property database.
Conditions for Receiving the Credit
To qualify for the Homestead Credit, the following conditions must be met during the previous tax year:
The property must not have been sold or transferred to new ownership.
No zoning classification changes requested by the homeowner that increased the property’s value.
No substantial changes in the property’s use.
The prior assessment must not have been clearly erroneous.
Additionally, the property must be the homeowner’s principal residence, and they must have lived there for at least six months of the year, including July 1, unless prevented by illness or special care needs. Homeowners can claim the credit on only one property—their primary residence.
Special Cases: Razed or Improved Dwellings
If a homeowner vacates their primary residence to rebuild or make significant improvements, they may still retain Homestead Credit eligibility. To qualify:
The property must have been the homeowner’s principal residence for at least three full tax years before the improvements or rebuilding began.
The project must be completed by the end of the tax year following the year in which work commenced.
Appeals
If your application for the Homestead Credit is denied, you can contact the Central Office of the Homestead Tax Credit Program for clarification. Final denials may be appealed within 30 days to the Property Tax Assessment Appeal Board in your jurisdiction.
2021 Legislation Update
Maryland law now requires that all contracts for residential property sales include the statement: “If you plan to live in this home as your principal residence, you may qualify for the Homestead Property Tax Credit. The Homestead Property Tax Credit may significantly reduce the amount of property taxes you owe.” Additionally, buyers must receive a copy of the Homestead Application during the settlement process.
For more details about the Homestead Property Tax Credit, visit Maryland’s Department of Assessments and Taxation or contact their office directly. To ensure the confidentiality of your personal information, avoid emailing completed applications and instead send them via mail or fax.
By understanding and applying for the Homestead Property Tax Credit, Maryland homeowners can effectively manage property tax costs and protect their finances from unexpected assessment increases.
Ready to buy or sell your home?Click here to contact me today for a personalized home plan and let’s discuss how we can make it a success! 🏡
