Unearned property tax credits
Matt Gonter, Baltimore resident and Wonk reader, doesn't like it when people wrongly get the benefit of the homestead property tax credit. It irritates him that absentee landlords on record as owner-occupiers are paying less in taxes than they ought to be, especially because he suspects the city's high tax rate could be lowered if no one was cheating.It irritates him so much that he's spent his free time researching online to see which owners of rented or vacant properties are reaping tax breaks for supposedly living there.
I wrote about his crusade last year. Now he has an update: He says he's finished checking out homes listed as vacant by Baltimore City and has found 1,148 that are on record with the state as principal residences. That means their owners could be collecting the homestead credit.
"I believe that this type of cheating runs rampant across the state," he told me, noting that a Montgomery County resident had similar results with a project there.
The homestead credit caps property tax increases for owner-occupiers. In Baltimore, the limit is 4 percent a year. The value of the tax break ballooned along with home prices earlier in the decade -- last year it was worth $1 billion to homeowners statewide.
The Maryland General Assembly, concerned about people collecting homestead credits on several homes at once, passed a law in 2007 requiring all homeowners to apply for the credit with their Social Security number -- giving the state a simple way to check if double-dipping is afoot. But the deadline isn't until 2012 for everyone who bought in or before 2007.
Perhaps that's why Gonter keeps finding addresses to add to his list. "The state ought to hire some researchers to look up vacant and rental properties throughout the state," he said.
As it happens, Baltimore ran an audit last year on homes registered as rentals, said Helene Grady, the city's deputy finance director. "We got a number of hits," she said.
The city did a separate check recently to see who's collecting special property tax credits requiring residency -- like the one for new construction -- even though they don't seem to be living in the homes. A few dozen owners will be getting letters soon, asking for documentation that they do indeed live there, Grady said. If they can't prove it or don't respond, they'll get revised tax bills.
While the homestead credit can add up to a lot over time, the city's new-construction credit is valuable immediately. It cuts an owner's tax bill in half the first year and a significant but lesser amount the following four years.
"As we have more and more of these properties getting the credit, we realized we needed to tighten up procedures," Grady said.
I'm sure you have thoughts -- you always do when the subject is property taxes. So weigh in.