With property taxes being due in July, I thought now was a good time to remind everyone about the Homestead Tax Credit.
What is it:
The Maryland Homestead Credit is a property tax credit that helps homeowners who occupy their property cut their property taxes by capping the property tax assessment increase allowed.
The Homestead Credit does not limit the assessed market value of the property but is actually a credit calculated on any assessment increase exceeding 10 percent (or the lower cap enacted by the local governments) in one year. So, homeowners pay property tax on the value of their property as declared in their previous tax assessment plus any increase in value up to 10 percent but nothing more.
For example, if your property was previously assessed at $100,000, but your new assessment is $120,000 (a 20 percent increase), you would pay taxes only on $110,000, which is a 10 percent increase. Taxes are calculated on the $120,000 amount then a credit for the taxes due on the $10,000 is subtracted. If your tax rate is $1.20 per $100 of assessed value, the tax credit would be $120 ($10,000 ÷ 100 x $1.20).
The credit is calculated based on the 10-percent cap for Maryland state property tax and 10 percent or less (as determined by local governments) for local taxation.
Who Is Eligible:
The Homestead credit applies only to owner-occupied properties. The property must be the owner's principal residence. An owner can only receive a credit on one property a year. He or she must have lived in it for at least six months, including July 1 of the year for which the credit is applicable. One exception is if the owner was temporarily unable to live there because of illness or need of special care. A married couple may only have one principal residence.
If a Homestead Credit application is not consistent with income tax and motor vehicle records, homeowners will be required to submit additional verification later.
How to Apply for the Homestead Credit:
If your property is eligible for the Homestead Credit, it will automatically be calculated on your tax assessment notice. So it is important that the information as to whether the property is your principal residence is accurate. This is found at the top of your assessment notice.
In 2007, the Maryland General Assembly enacted legislation that required homeowners to fill out a one-time application for the Homestead Credit. Homeowners are reminded that they only have until December 31, 2012 to submit a Homestead Application to continue being eligible for this credit. For more information on the application, visit: MD TAX WEBSITE
Some conditions that might make your property ineligible for the credit include:
- A transfer to new ownership during that year.
- A change in the zoning classification, requested by the homeowner, resulting in an increase value of the property.
- A substantial change in the use of the property.
- The previous assessment was clearly erroneous.