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County Council Considering Changes to the Homestead Tax Credit Cap

County Council Member Davis is proposing to add a question to the November ballot to change the County Charter and amend the homestead tax credit cap that was passed in the early 1990s.  Charter changes require legislation.  A formal public hearing would be held on July 21st.  At that time, the County Council can decide to request the question be posed to voters in November.

The proposed bill CB-48-2020 will be sent to Committee immediately tomorrow for consideration.

Since 1992, the homestead property tax credit has limited County tax assessment increases to the LESSER of the increase in Washington area CPI OR 5% (that is 5% maximum). If approved, the County Charter would be amended to allow an annual assessment to increase up to the State maximum of 10%.

To help homeowners deal with large assessment increases on their principal residence, state law has 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. View a listing of homestead caps for each local government.

Technically, the Homestead Credit does not limit the market value of the property as determined by the Department of Assessments and Taxation. Instead, it is actually 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 governments) for purposes of local taxation. In other words, the homeowner pays no property tax on the market value increase which is above the limit.

Example:
Assume that your old assessment was $100,000 and that your new phased-in assessment for the 1st year is $120,000. An increase of 10% would result in an assessment of $110,000. The difference between $120,000 and $110,000 is $10,000. The tax credit would apply to the taxes due on the $10,000. If the tax rate was $1.04 per $100 of assessed value, the tax credit would be $104 ($10,000 ÷ 100 x $1.04).

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