EFFECTIVE OCTOBER 1, 2007 FOR PROPERTY TRANSFERS AFTER DECEMBER 31, 2007
Let's start by answering your question, "What is the Maryland Homestead Tax Credit?"
The Homestead Credit helps homeowners deal with large assessment increases by limiting the increase in taxable assessments. You can check this Listing of Homestead Caps for Each Local Government, to find out the fixed amount where the property is located.
The Homestead Credit is calculated on any property tax assessment increase exceeding 10% (or the lower cap enacted by local governments - 2% in Anne Arundel County, for example) from one year to the next. The credit is calculated based on the 10% limit for purposes of the State property tax, and 10% or less (as determined by local governments) for purposes of local taxation. In other words, the homeowner pays no property tax on the market value increase which is above the limit. With record-breaking increases in the market value of homes in recent years, many homeowners now enjoy the benefit of this credit.
However, newly transferred properties are no longer eligible for this tax credit, so home buyers cannot rely upon the property tax amount in the MLS listing, which is usually the amount paid by the current home owner.
The Homestead Credit applies only when the following conditions are met during the previous tax year:
The property was not transferred to new ownership. - There was no change in the zoning classification requested by the homeowner resulting in an increase value of the property.
- A substantial change did not occur in the use of the property.
- The previous assessment was not clearly erroneous.
A further condition is that the dwelling must be the owner's principal residence and the owner must have lived in it for at least six months of the year, including July 1 of the year for which the credit is applicable, unless the owner was temporarily unable to do so by reason of illness or need of special care. An owner can receive a credit only on one property - the principal residence. Residential rental properties are not eligible for the Homestead Credit.
Current property owners: Check your tax assessment notice to find out if you receive a Homestead Credit:
1. Does the box at the top of the assessment notice page show that the property is the principal residence?
2. Do boxes 8, 9 and 10 show annual increases of more than 10% (or the lower cap enacted by the local governments) over the prior year?
3. Are boxes 1, 2 or 3 lower than box 8?
If you currently own and occupy your home, and you do not receive the tax credit, you can appeal to your local Tax Assessment office.
While the MLS listing may accurately reflect the tax amount in effect at the time of the listing, it may include the Homestead Credit that you will not be eligible to receive initially. Home buyers should check with the local tax assessment office to determine the property tax you will pay for the property, if it settles after December 31, 2007.
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