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Council Discusses Ways to Give More Tax Credits to City’s Homeowners

At last Saturday’s budget worksession, the City Council discussed a proposal that would give more property tax credits to City’s owner-occupied homeowners.

Maryland law allows Counties or municipalities to grant a property tax credit against their real property tax to offset increases in municipal income tax revenue as a result of an increase in the County’s income tax rate in excess of 2.6%. Prince George’s County’s income tax rate is 3.2%.

The tax credit is called Income Tax Offset Credit (ITOC).

The ITOC will be an alternative to the proposed tax reduction by reducing the FY23 property tax rate by the CYTR (constant yield) tax rate amount. For a homeowner of a $300K home, the proposed reduction of the tax rate from the current rate of 31.31 cents to the proposed rate of 30.18 cents would reduce the property owner’s tax bill by $34.

The ITOC would give City’s owner-occupied homeowners a much larger credit, as high as $195 in FY23.  City Staff is working to get a more accurate and realistic credit amount.

To set the qualifying criteria to receive the ITOC credits, Council’s ITOC proposal includes only those owner-occupied homeowners who currently receive the State Homestead Tax Credit.

The specific language in the Maryland State Code related to ITOC is as follows:

Maryland Tax – Property Section 9-221
(a) The Mayor and City Council of Baltimore or the governing body of a county or municipal corporation may grant, by law, a property tax credit against the county or municipal corporation property tax imposed on real property in order to offset in whole or in part increases in the county or municipal corporation income tax revenues resulting from a county income tax rate in excess of 2.6%.
(b) The credit granted under this section is available only to the owner-occupied property of a homeowner as defined in § 9-105 of this title.
(c) The Mayor and City Council of Baltimore or the governing body of a county or municipal corporation may provide by law for:
(1) the amount of a property tax credit under this section; and
(2) any other provisions necessary to carry out this section.

Montgomery County has an ITOC, in accordance with State law, with the following highlights:

  • Grants a credit against the county real property tax in order to offset, in whole or in part, increases in the county income tax revenues resulting from a county income tax rate in excess of 2.6%. The County’s current income tax rate is 3.2%, and the resulting Income Tax Offset Credit is currently $692.
  • The Montgomery County ITOC is available only to the owner of an owner-occupied residential property (principal residence).
  • The credit is applied only against the General Co. and Special Serv. Area ad valorem real property taxes.
  • The credit is not applied to any State or municipal taxes and charges County Solid Waste or Water Quality Protection Charges, or WSSC charges, such as Front Foot Benefit Assessments.

At the budget worksession, the Council generally agreed to explore the ITOC option further. City’s Finance department is still researching the logistics of getting a tax credit in place with SDAT. The Council has until May 31, 2022, when the FY 23 budget will be adopted.

My special thanks to Councilman Adams, for bringing the ITOC option for last week’s budget discussion.

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