A new requirement that Maryland homeowners apply for a Homestead Tax Credit is all that’s stopping local property tax bills from soaring along with property values.
While state and county officials have cheered the property value increases reported in the most recent round of assessments, homeowners stand to lose thousands of dollars if they don’t apply for the credit, which until 2008 was incorporated into property tax bills automatically.
Last year, Maryland’s General Assembly passed a law requiring homeowners to apply for the credit in order to stop people from claiming it on multiple properties. The application arrived with December’s assessment notices, said Robert Young, associate director of Maryland’s Department of Assessments and Taxation.
“We’re going to do everything humanly possible to get individuals to file for this,” Young said. “We’re not thinking about it at all in terms of additional revenue.”
On a homeowner’s principal residence, the credit serves as the tool to make up for the difference between skyrocketing assessments and county-determined caps on the extent to which those values determine the tax.
Over the past three years, for example, Prince George’s County saw the fastest property value growth in the state. Residential values grew 48.9 percent, or an average of 16.3 percent per year. Despite that, the county capped the rate on which residents pay property tax at 3 percent per year.
Imagine a home assessed in 2004 at $330,000, Young said, and assessed again in 2007 at $500,000.
Without any sort of credit, the $170,000 increase would be phased in over three years at about $57,000 per year. The tax bill arriving July 1, 2008, would be calculated on $387,000.
With the credit, however, and Prince George’s 3 percent cap, the first year’s tax bill would be
calculated on approximately $340,000.
While homeowners have no set deadline for applying, new home buyers have 180 days from their closing date, according to Mark Feinroth at the Maryland Association of Realtors.
“As the property appreciates, the cap becomes more and more valuable,” Feinroth said. “If you don’t apply for the credit, it becomes a big deal.”
At a glance
Average increase in total property value, 2004-2007:
» Montgomery County: 16 percent
» Prince George’s County: 51.6 percent
Countywide cap on property value increase for taxing purposes:
» Montgomery County: 10 percent
» Prince George’s County: 3 percent
Median home price, Nov. 2007:
» Montgomery County: $410,000
» Prince George’s County: $308,000
» Average yearly saving to homeowner using Homestead Credit: $1,000
