Homestead tax credit – are you getting yours?

Homestead Tax Credit
Homestead (infographic from census.gov)

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).

Originally published at https://dankrell.com/blog/2018/07/13/homestead-tax-credit-maryland/

By Dan Krell
Copyright © 2018.

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Protected by Copyscape Web Plagiarism DetectorDisclaimer. 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.

New laws affect homebuyers and homeowners

homesTwo new laws that went into effect this month will have an effect on home buyers and home owners. One law affects home buyers purchasing foreclosed property, and the other is with regard to the Maryland homestead property tax credit.

First, H.B. 1373 Real Property – Foreclosed Property Registry, which went into effect October 1st, requires that Maryland homes purchased at a foreclosure sale be registered with the State of Maryland. According to the foreclosure registry website a “foreclosure purchaser” must initially register a home within 30 days of the foreclosure sale, and a final registration within 30 days of the recordation of the deed. A “foreclosure purchaser” is defined by H.B. 1373 as being “…the person identified as the purchaser on the report of sale required by Maryland rule 14–305 for a foreclosure sale of residential property.”

You might wonder why a registration is necessary once a foreclosed home is purchased. The registry was an outgrowth of purchased foreclosed homes that remained vacant. Vacant homes are at risk for a variety of problems; and if left vacant and untended for long periods of time can not only become an eyesore, but can risk the health and safety of the immediate neighborhood. Trespassing and infestation is a major concern; the longer a home sits vacant and untended, the probability increases for vandalism, vermin, squatters, and gang activity.

The law is most likely aimed at lenders that purchase back their own foreclosure or bulk purchasers, because at one time it was possible that some of these homes sat untended for long periods of time. In the past, such homes might have been cited for health and safety code violations with the intent to have someone tend to the home. However, since ownership may not have been clear due to the foreclosure process or absence of a point of contact, some of these attempts went unheeded.

For more information or questions about the registry, contact the Maryland Department of Labor, Licensing, and Regulation (www.dllr.state.md.us).

The other law that went into effect this month is H.B. 1081 The Homestead Property Tax Credit Reform Act of 2012. The purpose of the law is to stop the abuse of applying the credit when not applicable. Home owners who are “caught” claiming multiple properties and/or rented properties may have to pay uncollected tax and possibly a penalty.

real estate

But enforcement of this law has been questioned, as was reported by Steve Kilar for the Baltimore Sun in his October 1st article (Homestead Credit Penalty Goes Into Effect This Week). Some are concerned if and how the penalty would be applied to those who are “caught” wrongly receiving the homestead credit. Enforcement may, as was reported, rely on the requirement for the State to prove “willful misrepresentation.”

The effort to weed out those who are undeserving of receiving the homestead credit began several years ago, when in 2007 home owners were required to apply to receive the credit. This application process is culminating to a frenzy of home owners who have not yet reapplied. And according to the Maryland Department of Assessments and Taxation, home owners who have yet to apply/reapply for the homestead credit will have until December 31st to submit the application. If you are unsure if you have applied/reapplied, you can check your status by following the instructions on the SDAT website on the homestead credit).

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This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

By Dan Krell
Copyright © 2012