With the real estate market's famous crash and burn, local governments, who were previously raking in the real estate fueled revenue, are now casting about for creative ways to fill their now empty coffers. One of the ways they accomplish this is through the use of "hidden" taxes. These are taxes that have been increased or tax credits that were previously given and have now been taken away.
The Disappearing Homestead Tax Exemption
Most states offer a tax credit to a homeowner who occupies his/her home as a primary residence, this benefit is normally referred to as a "homestead tax exemption". In Maryland, I have recently begun to hear horror stories from homeowners who are now faced with a shortfall in their escrow account and a higher mortgage payment, all owing to a new tax law which was passed earlier this year. This tax law, which previously allowed a seamless transfer of the homestead exemption, from a qualifying Seller to a qualifying Buyer at settlement, has been rolled back, and now a new buyer must re-apply to receive this credit.
Unfortunately, the law not only affects the new homebuyer, but the state has targeted existing homeowners who have been receiving this tax exemption all along. This year, these homeowners were not given the tax automatically as in times past, if a homeowner wants to continue to receive this benefit, he/she would need to reapply for it. (To apply for this exemption go to http://www.dat.state.md.us/sdatweb/HTC-60.pdf)
Although, I have used Maryland as my sample for this post, they are definitely not the only state resorting to these types of tactics. If you are thinking about purchasing a home, make sure that you check with your Title Company or attorney (whoever is performing the closing) and have them verify that the tax amount that was given to you is correct. Many multiple listing services auto fill the tax information and chances are the amount in the property listing is not correct.
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