1. Local

Homestead Tax Credit in Maryland

By

The Maryland Homestead Credit is a property tax credit that helps homeowners who occupy their property cut their property taxes by capping the property tax assessment increase allowed.

| | For income tax credits, see MD Tax Credits | |

Every county and municipality must limit its increases in its taxable assessments to 10 percent or less. Many areas are well under that 10 percent limit. Scroll down for a list of Maryland local governments' assessment caps.

How the Homestead Credit Is Calculated

The Homestead Credit does not limit the assessed market value of the property but is actually a credit calculated on any assessment increase exceeding 10 percent (or the lower cap enacted by the local governments) in one year. So, homeowners pay property tax on the value of their property as declared in their previous tax assessment plus any increase in value up to 10 percent but nothing more.

For example, if your property was previously assessed at $100,000, but your new assessment is $120,000 (a 20 percent increase), you would pay taxes only on $110,000, which is a 10 percent increase. Taxes are calculated on the $120,000 amount then a credit for the taxes due on the $10,000 is subtracted. If your tax rate is $1.20 per $100 of assessed value, the tax credit would be $120 ($10,000 ÷ 100 x $1.20).

The credit is calculated based on the 10-percent cap for Maryland state property tax and 10 percent or less (as determined by local governments) for local taxation.

Who Is Eligible

The Homestead credit applies only to owner-occupied properties. The property must be the owner's principal residence. An owner can only receive a credit on one property a year. He or she must have lived in it for at least six months, including July 1 of the year for which the credit is applicable. One exception is if the owner was temporarily unable to live there because of illness or need of special care. A married couple may only have one principal residence.

If a Homestead Credit application is not consistent with income tax and motor vehicle records, homeowners will be required to submit additional verification later.

How to Apply for the Homestead Credit

If your property is eligible for the Homestead Credit, it will automatically be calculated on your tax assessment notice. So it is important that the information as to whether the property is your principal residence is accurate. This is found at the top of your assessment notice.

In 2007, the Maryland General Assembly enacted legislation that required homeowners to fill out a one-time application for the Homestead Credit. The legislation takes effect with the 2008 assessments. If the property is designated as you principal residence, an application was included with your tax assessment notice. Even homeowners who have previously received the credit must apply in order to continue receiving the credit. This form is due by April 1. For more information on the application, call 410-767-2165 in the Baltimore area or on 1-866-650-8783 elsewhere in Maryland.

Some conditions that might make your property ineligible for the credit include:

  • A transfer to new ownership during that year.
  • A change in the zoning classification, requested by the homeowner, resulting in an increase value of the property.
  • A substantial change in the use of the property.
  • The previous assessment was clearly erroneous.

Local Maryland Governments' Homestead Credit Caps

The Homestead Credit for local income taxes is calculated on the amount of the property value assessment above the percentages listed below.
  • Allegany County - 110 percent
  • Anne Arundel County - 102 percent
  • Annapolis - 110 percent
  • Baltimore City - 104 percent
  • Baltimore County - 104 percent
  • Calvert County - 110 percent
  • Chesapeake Beach - 110 percent
  • Caroline County - 105 percent
  • Denton - 110 percent
  • Federalsburg - 110 percent
  • Goldsboro - 110 percent
  • Greensboro - 110 percent
  • Marydel - 110 percent
  • Preston - 110 percent
  • Ridgely - 105 percent
  • Carroll County - 107 percent
  • Hampstead - 107 percent
  • Mt. Airy - 100 percent
  • Sykesville - 110 percent
  • Taneytown - 110 percent
  • Westminster - 107 percent
  • Cecil County - 108 percent
  • Cecilton - 108 percent
  • Charlestown - 108 percent
  • Chesapeake City - 108 percent
  • Elkton - 105 percent
  • North East - 108 percent
  • Port Deposit - 110 percent
  • Charles County - 107 percent
  • Indian Head - 110 percent
  • Dorchester - 105 percent
  • Hurlock - 110 percent
  • Frederick - 105 percent
  • Brunswick 110 percent
  • Frederick City - 105 percent
  • Mt. Airy - 100 percent
  • Walkersville - 110 percent
  • Garrett County - 105 percent
  • Grantsville - 110 percent
  • Loch Lynn Heights - 110 percent
  • Harford County - 110 percent
  • Aberdeen - 110 percent
  • Bel Air - 110 percent
  • Havre de Grace - 110 percent
  • Howard County - 105 percent
  • Kent County - 105 percent
  • Betterton - 110 percent
  • Chestertown - 105 percent
  • Galena - 110 percent
  • Millington - 110 percent
  • Rock Hall - 110 percent
  • Montgomery County - 110 percent
  • Kensington - 105 percent
  • Rockville - 110 percent
  • Somerset County - 110 percent
  • Takoma Park - 110 percent
  • Town of Chevy Chase - 110 percent
  • Prince George's - 104 percent
  • Berwyn Heights - 110 percent
  • Bladensburg - 110 percent
  • Bowie - 105 percent
  • Cheverly - 110 percent
  • College Park - 101 percent
  • Colmar Manor - 105 percent
  • Cottage City - 110 percent
  • District Heights - 110 percent
  • Greenbelt - 110 percent
  • Hyattsville - 110 percent
  • Laurel - 110 percent
  • Morningside - 110 percent
  • Mt. Ranier - 110 percent
  • New Carrollton - 110 percent
  • North Brentwood - 110 percent
  • Riverdale Park - 110 percent
  • University Park - 110 percent
  • Upper Marlboro - 100 percent
  • Queen Anne's County - 105 percent
  • Centreville - 110 percent
  • Millington - 110 percent
  • St. Mary's County - 105 percent
  • Leonardtown 110 percent
  • Somerset County - 110 percent
  • Talbot County - 100 percent
  • Easton - 110 percent
  • Oxford - 105 percent
  • Washington County - 105 percent
  • Hagerstown - 105 percent
  • Smithsburg - 105 percent
  • Wicomico County - 110 percent
  • Salisbury - 100 percent
  • Worcester - 103 percent
  • Berlin - 105 percent
  • Pocomoke City - 110 percent

©2014 About.com. All rights reserved.