Updated June 28, 2021
Affordable housing is a concern throughout the United States, and the state of Maryland is no exception. Legislators have worked to pass bills to make housing more affordable, primarily through property tax credits.
Homestead Property Tax Credit
To help Maryland 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.
The Homestead Property Tax Credit does not limit the market value of the property as determined by the Department of Assessments and Taxation. Instead, it is 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.
Application Requirement
To prevent improper granting of this credit on rented or multiple properties of a single owner, a law was enacted in 2007 that requires all homeowners to submit a one-time application to establish eligibility for the credit.
[Download the PDF application here.]
The online application is available at:
https://sdathtc.dat.maryland.gov/
Find the status of your Homestead eligibility by looking up your property on the Maryland Real Property database.
Conditions
This property tax credit will be granted if the following conditions are met during the previous tax year:
- The property was not transferred to new ownership.
- There was no change in the zoning classification requested by the homeowner resulting in an increase value of the property.
- A substantial change did not occur in the use of the property.
- The previous assessment was not clearly erroneous.
- A further condition is that the dwelling must be the owner’s principal residence and the owner must have lived in it for at least six months of the year, including July 1 of the year for which the credit is applicable, unless the owner was temporarily unable to do so by reason of illness or need of special care. An owner can receive a credit only on one property—the principal residence.
- Razed Dwelling and Vacated Dwelling for Making Substantial Improvements —
Property owners who choose to vacate their principal residence to raze the dwelling in order to replace it with a new home on the subject property or to make substantial improvements to the property can continue to receive Homestead Tax Credit eligibility provided two conditions are met. First, the homeowner(s) must have owned and occupied the property as a principal residence for at least 3 full tax years immediately preceding the razing or the commencement of the substantial improvements. Second, the building of the replacement home or making the substantial improvements must be completed within the next succeeding tax year after the tax year in which the razing or the substantial improvements were commenced.
For questions about the Homestead Property Tax Credit, call 410-767-2165 in the Baltimore metropolitan area or 1-866-650-8783 elsewhere in Maryland or email sdat.homestead@maryland.gov.
Disabled Veteran Property Tax Relief
With the passage of HB 257/SB 417, which became effective June 1, 2020 for all tax years beginning after June 30, 2020, county and municipal governments may grant tax credits against property taxes imposed by that county or municipality for disabled veterans and their spouses. The tax credit can be granted for veterans with at least a 50% service-related disability.
Veterans who qualify must submit appropriate documentation for their disability.
Per HB 257, a qualifying disabled veteran is one who:
- Has been honorably discharged from active military, naval, or air service
- Has been declared by the Veterans Administration to have a service-related disability of at least 50% (e.g., blindness) that is: 1) Reasonably certain to be a permanent disability; and 2) Was not caused by misconduct of the veteran
- Had an adjusted gross income for the immediately preceding taxable year equal to or less than $100,000
Qualifying Property
For a disabled veterans’ property to qualify for a property tax credit, it must be:
- The veteran’s legal residence
- Not occupied by more than two families
The property eligible for the tax credit includes the lot and structures of the real property used as aresidence.
Tax Credit Amount
The amount of property tax credit a disabled veteran qualifies for depends on the degree of disability:
- A veteran with a service-connected disability of between 75-99% may receive a tax credit of 50%.
- A veteran with a service-connected disability of between 50% and 74% may receive a tax credit of 25%.
Required Documentation
Veterans who believe they qualify for a property tax credit must apply with the taxing county or municipality by providing:
- A copy of the veteran’s discharge papers
- A certification of the disability on a form provided by the taxing authority
No one but the veteran and the applicable employees of the taxing authorities may view the veteran’s certificate of disability.
The taxing locality may continue to provide the tax credit to the surviving spouse of the disabled veteran. This authority may also provide for the duration of the tax credit, regulations for processing the application, definitions of the surviving spouse and the amount of duration of the tax credit for the surviving spouse, and other provisions required to implement the tax credit.
Property Tax Relief for Active Military
Maryland also honors disabled military personnel and their surviving spouses, and recently eligibility for that credit with the passage of HB 76/700, which took effect June 1, 2020, for tax years beginning after June 30, 2020.
Tax credits are available to disabled military personnel and their surviving spouses even when:
- They’re not retired (may be retired, active duty, or honorably discharged)
- They haven’t lived in the property for 40 years (a requirement under the old law)
It’s up to each local government to set eligibility requirements for the credit, however:
- It may not exceed 20% of the total tax.
- It may not be granted for longer than five years.
Discretion of the County or Municipality
Notwithstanding the above, the taxing authority (county or municipality) may establish its own criteria for:
- The maximum assessed value of a property that’s eligible for the tax credit
- The minimum number of years that the eligible individual must reside in the same property (butnot to exceed 40 years
- Criteria that define a service-connected disability
- Other eligibility criteria, regulations, and provisions required for processing the application
Surviving Spouse Eligibility
To be eligible to receive property tax credit, a surviving spouse of an eligible service person may not be remarried.
Historic Revitalization Tax Credits in Maryland (HB 759)
For nearly two decades, the Maryland’s Historic Revitalization Tax Credit Program has been used to help preserve historic buildings in the state as well as promote investment in local economies. It does this by providing state income tax credits for qualified rehabilitation expenses.
Maryland’s Historic Revitalization Tax Credit is available for:
- Primary residences
- Secondary residences
- Commercial properties (not small commercial projects, but properties other than a single-family,owner-occupied residence)
Historic Revitalization Tax Credit: Transferability (HB 862 and SB 978)
To increase the pool of potential investors in historic revitalization projects, the legislature passed HB 862/SB 978, which authorizes the transfer of the Historic Revitalization Tax Credit to a third party involved in the project. For instance, this could include a bank or other investor.
Effective July 1, 2020, if the tax credit exceeds the state income tax of the transferee, the transferee may claim a refund in the amount of the excess, or may transfer the remainder of the tax credit to any individual or business entity.
Other Tax Credit Legislation in Maryland
This was a tax credit legislation year for Maryland. Multiple additional tax credit bills passed, many of them amending, extending, and clarifying prior legislation.
- HB 980/SB 775 – Income Tax – Energy Storage Tax Credit – Alterations
- HB 1076 – Homestead Property Tax Credit – Date of Transfer of Dwelling
- HB 1189/SB 63 – Baltimore City – Property Tax Credit for Newly Constructed Dwellings –Reauthorization and Modification
- SB 48 – Property Tax – Homeowners’ and Renters’ Property Tax Credits – Deadlines
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