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* Please consult your Tax advisor for legal tax advice.
** IMPORTANT: New application
requirements to maintain your homestead tax credit.
click
here for details
What is the Homestead
Credit?
To help homeowners
deal with large assessment increases on their principal residence,
state law has established the Homestead Property Tax Credit. The
Homestead Credit limits the increase in taxable assessments each
year to a fixed percentage. Every county and municipality in
Maryland is required to limit taxable assessment increases to 10% or
less each year.
View a listing
of homestead caps for each local government.
Technically,
the Homestead Credit does not limit the market value of the property
as determined by the Department of Assessments and Taxation.
Instead, it is actually a credit calculated on any assessment
increase exceeding 10% (or the lower cap enacted by the local
governments) 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.
Example
Assume that
your old assessment was $100,000 and that your new phased-in
assessment for the 1st year is $120,000. An increase of 10% would
result in an assessment of $110,000. The difference between
$120,000 and $110,000 is $10,000. The tax credit would apply to the
taxes due on the $10,000. If the tax rate was $1.04 per $100 of
assessed value, the tax credit would be $104 ($10,000 ÷ 100 x
$1.04).
To prevent
improper granting of this credit on rented or multiple properties of
a single owner, a new law was enacted in 2007 that requires all
homeowners to submit a
one-time application to establish eligibility for the credit.
The application form will be included in the assessment notice
mailed to one-third of the homeowners at the end of December for the
next three years. It also will be mailed to new purchasers of
residential property.
>
Download the Application for Homestead Tax
Eligibility
Conditions
The tax credit
will be granted if 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.
Appeal Rights
If you have
been denied a Homestead Tax Credit and you believe that you are
eligible, contact the Central Office for the Homestead Tax Credit
Program at the telephone numbers listed below. A final denial of a
Homestead Tax Credit by the Central Office may be appealed within 30
days to the Property Tax Assessment Appeal Board in the jurisdiction
where the property is located.
Further
Information
For questions
about the Homestead Tax Credit, you may telephone 410-767-2165 in
the Baltimore metropolitan area or at 1-866-650-8783 toll free
elsewhere in Maryland or visit the Department’s website at
www.dat.state.md.us
Source:
http://www.dat.state.md.us/sdatweb/homestead.html
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© 2007 Brian Pakulla