It’s been eleven years since Maryland forced all qualifying homeowners to reapply for the Homestead Property Tax Credit. Prior to the change in the application, applying for the Homestead Tax Credit was almost automatic for homeowners who claimed a primary residence. However, many abused the program to get tax credits on non-principal residences by claiming multiple properties or rental properties as their primary residence. The 2007 change was implemented to reexamine ownership, so as to stop the abuse of the property tax credit program.
The Homestead Property Tax Credit was created to assist homeowners with significant assessment increases on their principal residences. The credit limits the amount of taxable assessments. The state requires each county and municipality to limit taxable assessments to ten percent or less. Most of Montgomery County is limited to the state cap of ten percent. The Homestead Credit limits the property tax that the homeowner pays to the allowed limit.
According to the State Department of Assessments and Taxation website (dat.maryland.gov), the Homestead Property Tax Credit is granted if during the previous 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; 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.
A homeowner who vacates their home for major improvements, or plans to raze the home to build a new home may qualify for the Credit if the following two conditions are met: (1) the property was the homeowner’s principal residence for at least 3 full tax years immediately preceding the razing or starting the improvements; and (2) the building of the replacement home or the improvements must be completed within the next succeeding tax year after the tax year in which the razing or the substantial improvements were commenced.
Since 2007, many homeowners and home buyers have been unaware of the Homestead Tax Credit. Additionally, since then, many homeowners who may qualify for the Credit did not reapply. Many homeowners who purchased homes since then have also not applied for the Credit. Besides being unaware of their eligibility for the Credit, they may not have understood the Homestead Tax Credit and the application process. But this will change because of two bills passed by the Maryland General Assembly (HB990 Homestead Property Tax Credit Notification on Acquisition of Property, and HB305/SB158 Homestead Property Tax Credit Program Eligibility Awareness).
Beginning July 1st, the State Department of Assessments and Taxation is required to mail a notice about the Homestead Property Tax Credit to individuals who purchase a home. And effective October 1st, the State Department of Assessments and Taxation is required to identify homeowners who may be eligible for the Homestead Property Tax Credit Program (but failed to apply) and provide information on applying for the Credit with each assessment notice. For more information about your Homestead Property Tax Credit eligibility status and application process, please visit the State Department of Assessments and Taxation website (dat.maryland.gov).
Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.