There has been a lot of confusion surrounding Maryland’s Homestead Tax Credit and understandably so, it’s a complicated issue.
Homeowners across the state are used to seeing the assessments on their home increase, while their property tax goes up accordingly. Something different is happening now, with the decline in the housing market. Many across the state are left scratching their head as their property value declines, while their tax bill goes up.
The culprit is the Homestead Tax Credit. The credit places a limit on how much the assessed value of a home can increase to 10% a year (different municipalities have placed their own limit, like the city of Baltimore which says the value can’t increase more than 4% a year.)
As an example, a house that’s worth $100,000 in 2007, jumps to $130,000 in 2008. The assessed value that you pay taxes on can only increase to $110,000 and your tax bill would go up 10%. Then do to an ailing economy the value of your house drops to $120,000 in 2009. Even though the value of your house dropped, Homestead Tax Credit kicks in again and says the assessed value can only increase another 10% to $120,000. Hence, the all too often occurrence in Maryland where a decline in the value of your home will result in higher tax bill.
The Homestead Tax Credit is applied automatically until 2012, and if you haven’t applied for it by then you won’t get the savings.
Click here for the application and here if you would like more information about the law.
