Legal Bulletins

In 2007, the Maryland General Assembly enacted a law (Chapters 564 and 565 of the Laws of Maryland of 2007) that requires all homeowners to timely submit a one-time application with the Maryland State Department of Assessments and Taxation ("SDAT") to establish their right to the Homestead Property Tax Credit.

For homeowners who purchased their dwellings before January 1, 2008, failure to file an application by the end of this year will cause you to lose the credit for the 2013/2014 real property tax year and thereafter, unless you file for reinstatement (which would not take effect until the following year).

People who bought their homes on or after January 1, 2008, must file their applications by the first July 1 after their deeds are dated or recorded. See Maryland Code, Tax-Property Article, Section 9-105(d)(6).

To help homeowners deal with large assessment increases on their principal residences, Maryland established the Homestead Property Tax Credit. The Homestead Credit limits the increase in taxable assessments each year to a fixed percentage. Every county and municipality in Maryland is required to limit taxable assessment increases to 10% or less each year. The limit is 4% in Baltimore City and Baltimore County. This break can add up to considerable savings. In Baltimore City alone, thousands of homeowners had at least one-half of their property taxes forgiven by the homestead credit this tax year.

Technically, the Homestead Credit does not limit the market value of the property as determined by the SDAT. Instead, it is a credit calculated on any assessment increase exceeding 10% (or the lower cap enacted by the local governments) from one year to the next. The credit is calculated based on the 10% limit for purposes of the State property tax, and 10% or less (as determined by local government) for purposes of local taxation. In other words, the homeowner pays no property tax on the market value increase which is above the limit.

The Homestead Tax Credit only applies to principal residences, not rental or vacation properties. A person may claim the Homestead Tax Credit for only one dwelling, and to claim the credit, the homeowner must actually reside in the house by July 1 of the taxable year for which the property tax credit is allowed. The 2007 law was passed to prevent improper granting of this credit on rented or multiple properties of a single owner.

To submit a Homestead Tax Credit Eligibility Application through the SDAT website, you must be issued an application form by the SDAT containing an Access Number and your Real Property Account Number. You need the Account and Access Numbers as part of the submission process. The Access number is in the box in the upper right corner of the application form mailed to you by the SDAT.

The application form was included in the assessment notice mailed to one-third of the homeowners at the end of December in each of 2008, 2009 and 2010, as their assessments came up for renewal. Homeowners received their credits through December 31, 2012, via a grace period. However, to continue to receive the credits, you must file an application. If you have not received the form, call the SDAT at 410-767-2165, and it will mail you a form with an access number. The deadline is December 31, 2012, but we recommend that you do this as soon as possible.

You can find out if you have already filed an application by searching for your property on the Real Property database (http://sdatcert3.reiusa.org/rp_rewrite/) and looking at the new information on filing status at the bottom of the page listing your residence.

If you have questions about this, please contact the Gordon Feinblatt attorney with whom you regularly deal or Jeff Spatz at (410) 576-4124 or jspatz@gfrlaw.com.