Maryland Tax Credit Programs for Homeowners
Homeownership involves not just paying for the purchase price of your home, but also your annual property taxes, which are used to fund government operations, like schools, roads and public safety.
State law provides that all real property is subject to the property tax. Each year, you will receive a property tax bill that reflects the assessed value of your property along with the amount owed. Along with that, Maryland has two tax credit programs which moderate the rate of your tax increases due to property appreciation.
Homestead Tax Credit
The Homestead Tax Credit is essentially a cap on property tax increases on owner-occupied properties. While property assessments may rise dramatically, the Homestead Credit ensures that property tax bills will not. Maryland residents receive a credit for taxes owed on assessment increases that are over 10% of the prior year.
There is a catch: to receive this benefit, you must submit a one-time application to SDAT. To make it easy for buyers, an application for the credit is given at settlement on a home purchase. Recent legislation also allows certain individuals to retroactively claim credits to which they were entitled in a previous year.
More information on the Homestead Credit and the application form can be found at dat.maryland.gov/homestead.
Homeowners’ Tax Credit
Unlike the Homestead Credit, the Homeowner’s Tax Credit is restricted to those making less than $60,000 in household income and who have a net worth under $200,000 (excluding the value of their home and retirement accounts). The state uses a sliding scale to cap property tax amounts to a certain percentage of annual household income.
To claim the credit, most homeowners must reapply each year and certify that they meet the income and asset thresholds. However, those whose gross income is limited to social security benefits, pensions, and annuities need only to apply every 3 years, while still certifying their incomes annually.
The application cut-off is October 1, but those applying by April 15 can have the credit applied directly to their annual property tax bill.
If homeowners missed claiming this credit when they were eligible, recent legislation allows them to claim a retroactive credit under certain circumstances. It is also recommended that home buyers proactively apply for the credit before closing on the property, as this can reduce the amount of prepaid taxes charged at settlement. For more information, visit dat.maryland.gov/homeowners or email sdat.homeowners@maryland.gov.