Our very first episode of All Things Home is about a tax credit for anyone who owns a home in Maryland called the Homestead Tax Credit. The Homestead Tax Credit is essentially a system put in place by the state of Maryland to protect homeowners who are living in their primary residence from being hit with an enormous increase in their tax bill due to property values increasing over time. The way that this works at the macro level is that every year, a third of Maryland is reassessed.
There's this rolling schedule where depending on where you live, your zip code or these maps that they use, every three years, the state basically uses some sort of algorithm, I'm sure, looks at what your home was previously assessed for and applies an increase to it based on what property values have done overall. A lot of people wonder how accurate their tax assessment is, and it's not that accurate. It's less accurate than a Zestimate.
Oftentimes if you've owned a home for a very long time and it's never sold, there's just not a lot of insight for the state as far as the condition of your home and what you've done to it and all these kinds of things. Just as a sidebar, people sometimes stress about having a low property assessment, and I always am quick to say, no, no, no. The lower your assessment, the better.
It's great to fly under the radar, have a lower tax bill. There's no glory in paying more in property tax. I think people worry that when their house goes on the market, if the assessment looks low, are buyers going to think that their house is worth less? And no, buyers really understand.
Generally, they compare your home to others and they understand the price bracket that it's in. At the end of every calendar year, a third of homeowners in Maryland get a notice that their property has been reassessed. Generally, assessments go up all the time unless values have gone down drastically.
Back in 2008, when home values started going down, there were some reassessments downward, but generally home values and property tax bills are always going up. As you probably know, if you are aware of the world, we've had huge inflation and an increase in home values since basically the start of COVID in the beginning of 2020. Home values across this entire area, in many cases, are up 50% compared to what they were worth pre-COVID.
Not always, it definitely varies by house and condition, but the bottom line is home values are way up. I'm going to speak specifically to Baltimore City and County in these stats since that is the majority of the TBG community in our audience. Although we definitely have clients that we regularly help in all of the surrounding counties and beyond.
If you have specific questions beyond anything Baltimore-centric, I'm happy to answer them. The bottom line is assessments for homes in Baltimore City went up 21% this December, according to the state, and Baltimore County homes went up 25%. That is a huge increase.
If you can imagine that you have a tax bill of, let's just use an easy round number of $10,000 a year, and then it's going up 20%, that is a hike from $10,000 a year to $12,000 a year in your tax bill, which would be an immediate change in your coming tax bill cycle if it were not for the Homestead Tax Credit. What the Homestead Tax Credit does is it caps your annual increase at a lower amount. It does vary by county throughout Maryland.
Baltimore City and County cap your annual tax increase at 4%. If your home is assessed at whatever value that then translates to a $10,000 a year tax bill, instead of jumping right from 10 to $12,000 as the increase, you would instead just go up that 4%, which would be $400 a year in that example. Your tax bill for the next year would be $10,400.
Then it would be $10,800 and so on and so forth. It just helps you absorb the tax increase slowly over time and not have this skyrocketing effect as it were. There are different rates for every county.
For example, Anne Arundel's Homestead cap is at 2%, which is awesome. That's a really good one. There are a lot of other counties that are 5% or a bit more.
All of that is on a website that is going to be linked to in the show notes. The thing to know is that you can only get this cap if the home is your primary residence. That means it's the home you're living in, that you're occupying.
You don't just magically get this credit, unfortunately. You have to file a one-time application with the state of Maryland where you fill out a form and say, this is my primary residence. Here's a little bit of information.
You can mail, or I believe you can email it in from what I understand. They will process it. At some point, they will approve it, assuming everything is on the up and up.
We send information about this to all of our clients after they buy a home with us. That said, inboxes get really crazy. Moving is stressful.
There's 8 billion things to do. I find that sometimes people just miss the email. When I put this up on my Instagram story the other day, I heard from many people, a lot of TBG clients who did have this in place or wanted to double check.
I also heard from some other people who know me but hadn't used us as an agent. A lot of them got stuck with these increases without filing for the credit. Just a little plug for how detail-oriented our team is.
We're into systems and templates and trying to protect people as much as possible in all the ways that we do. If you've worked with us, you probably got that email and probably did it, but you may not be sure. It's very easy to find out.
There is a website, again, that is linked here in the show notes. You want to go to that site. At the very top of it, there is a link to go to the real property webpage.
It's red and bold as of this recording. You open that link and then it's going to have you drop down and select what county you're in. Then it'll ask you to select the search method.
That's where I generally recommend putting your street address. All the other ones are more arcane ways to search. Then you'll put in your house number, 123, and then your street name, Main Street.
When you search it, it will take you to a screen showing you your overall tax bill. What you need to do is scroll all the way down to the very bottom, and there will be a little field that says... I'm actually pulling it up while I'm recording this. Here we go.
At the very bottom, it will say Homestead Application Information. Then it will say Homestead Application Status.
It will either say nothing on file or pending or in process, which means you recently filed and they're still processing it. Or it will say approved and the date that it was approved upon. If you go to this site and it's either in process or approved, you're golden.
If it's not there, you need to go ahead and get it on file. Then you can go back to the main website that you started with, fill out your application. It is not difficult.
Get it in place, and you will at least be protected for any future increases. Another FAQ that comes up is right below the Homestead Application Information on your tax record on that site where you would go to verify it is something else called the Homeowners Tax Credit. It's difficult that they are so similarly named.
I've had multiple people reach out to me and say, what's that? The Homeowners Tax Credit is an income-oriented tax credit. If your total household income according to your tax return is $60,000 per year or less, you might qualify for an additional tax credit that has to do with your income. There's a calculation the state uses, your income versus your tax bill.
I believe last I read about this, which has just been a little while, you have to refile for that every year. If that sounds like it might apply to you, definitely check that out. That is also easy to navigate to from the website that I am referring you to.
In summary, that's what it is. That's how you check if you have it on file or not, how to file for it if need be. From there, if you have any other questions, just let me or anyone at The Beliveau Group know.
A common question I've gotten as well is, if I have a rental property, is there any way to use this? The answer is no. This is really designed for people who are occupying their primary residence and that is how that goes. That concludes the Homestead Tax Credit lesson.
Thank you for listening. If you have follow-up questions, you know where to find us. If you have other questions that you would like to have answered on this podcast about all things home, let us know.
We are ready to record and share more wisdom. Thanks.
