The Maryland Homestead Tax Credit protects homeowners when their home’s assessment value increases more than 10% in any given year. The credit is applied to all taxes due on the amount of the increase that exceeds 10%; in effect, the increase in value is capped at 10%. In recent years, this has not been an issue as assessed values decreased, but the housing market is now improving in many parts of Maryland.
For example, assume your home’s current assessment is $410,000. The new assessment increases your home’s annual assessment to $500,000 in the first year, which is more than a 10% increase. A 10% increase would have only increased the value to $451,000, a difference of $49,000. If the homeowner had applied for and received the homestead tax credit, he would not be required to pay any real property taxes on the amount above $451,000.
Prior to 2007, taxpayers automatically received the homestead tax credit. However, Maryland changed the rules to now require homeowners to file an application. In order to receive the credit you must show that: (i) the property was not recently transferred; (ii) the homeowner has not requested a change of the property’s zoning that would increase the value of the property; (iii) there were no substantial improvements to the property that would increase its value; (iv) the previous assessment was not erroneous; (v) it is the principal residence of the owner; and (vi) the owner has lived there for at least six (6) months, including July 1 of the tax year.
As the real estate market turns around, counties around Maryland will start to increase real property value assessments. It is important to ensure you have filed the application so that you can receive the credit. The application is available online at https://sdathtc.resiusa.org/homestead and must be filed no later than December 31, 2012 in order to receive the benefit for this year.