A Quick and Easy Way to Save Money: the Homestead Tax Credit

Property taxes are not generally an exciting topic, I’ll give you that. However, what if you knew you could do something today in just a few minutes that Future You would really appreciate and would save you money (and anguish)? Read on for the details on something you can do as a Maryland homeowner: apply for the Homestead Tax Credit.

What is the homestead tax credit? (https://dat.maryland.gov/realproperty/pages/maryland-homestead-tax-credit.aspx)

It 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. So if your assessment went up by more than 10%, you would not pay tax on the market value increase which is above the limit.

For example, if your $100,000 assessment rose to $120,000, that’s a 20% hike. The tax credit would prevent any increase above 10% or $110,000 and would apply to the taxes due on the amount above that or $10,000 in this example. At a tax rate of $1.04 per $100 of assessed value, the tax credit would be $104.

PLEASE, please, please note. A tax assessment is the state’s estimate of what your house is worth for taxation purposes. It has absolutely no bearing on market value. I can estimate your home value for resale purposes at any time, or help with comparables for a refinance, but please don’t confuse the tax assessed value with your home’s actual market value. (Most home buyers would prefer the former to be as low as possible and the latter as high as possible!)

After your deed goes on record, you should get a notice from the State of Maryland that you’re eligible to apply. This credit applies for your primary residence only, and you must have lived in it for at least 6 months of the year, including July 1 of the year for which the credit is applied. You can check to see if your deed is on record in the Maryland Land Records (https://mdlandrec.net/main/), or just ask your title company to check for you.

How do you know if you already applied? Two ways. One, check your property tax reassessment notice. It will say “Homestead Application Approval” - YES or NO. Two, check your property on the MD State Department of Assessments and Taxation website, SDAT (https://sdat.dat.maryland.gov/RealProperty/Pages/default.aspx). After you select your county and search by address, scroll down to the bottom and look in the “Homestead Application Information” section.

How do you apply, if you need to? Download a PDF application form and mail it in (link: https://dat.maryland.gov/SDAT%20Forms/Homestead_application.pdf), even FAX it in to 410-225-9344 if that’s how you roll, or apply online (link: https://sdathtc.dat.maryland.gov/). While it can take up to a year to process, once it’s approved, it lasts as long as you own the property. You will not get any kind of notification - you’ll have to look on SDAT.

Go apply today! Next time your assessment rises, you’ll be happy you did.