A reader named Erich wrote in the other day to defend the Homestead Property Tax Credit, which acts as a cap on spiraling property-tax bills for homeowners but as a side effect leaves neighbors in similar homes with very different bills to pay.

A former Baltimore resident, Erich bought in Pasadena in 2007 and homes values have only fallen since. So he says he isn't a big homestead recipient -- he isn't getting a break from the credit at all. But he likes the idea that his bill will be capped if assessed values ever do go up beyond Anne Arundel County's 2 percent-a-year limit.

Here's what he wrote:

I completely disagree with the argument that there is something wrong with the Homestead credit simply because two neighbors with similar houses pay extremely different tax amounts. So what? When you purchase a house your taxes are listed on the settlement statement, it's not something the state/city surprises you with. The Homestead credit is there to protect homeowners from drastic changes in their tax bills based on the revolving property tax assessments that happen every 3 years. ... So owners that buy at a certain time and lock in the credit should be able to get that smooth curve in their tax bills. ...

In the 'robbing peter to pay paul' example, it's not transferring tax burden from one house to another because the newer neighbor also gets the tax credit, it just happens to be on a higher assessed value. ... As far as 'double dippers' and landlords getting the credit, go after them, they are breaking the law.

Continue reading "In defense of the homestead credit" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (7)
Categories: Homestead Property Tax Credit
        

If you think your property assessment is wrong (and you're not among the one-third of owners who were just reassessed), you'd better get a move on. The deadline to appeal is Jan. 3 -- Tuesday.

Some homeowners are inevitably surprised to hear they can appeal on off-years. But yes, you can appeal every year, not just the one-in-three when assessors revalue your home.

Notices just went out this week for those who have been reassessed this year, and those property owners have until Feb. 10 to decide whether to fight. For everyone else, the clock is rapidly ticking down.

This out-of-cycle appeal is called a "petition for review." Home sale prices haven't stopped their downward trend, so you probably can make a strong case that your value is lower now -- especially if you were last reassessed two years ago. Like any property appeal, you want to arm yourself with sales data showing what people have paid for comparable properties.

Beware of relying on short sales and foreclosures unless they're a substantial part of the market near you. The state Department of Assessments and Taxation says it wants to see "arm's length" transactions in which banks played no role beyond financier, so you'll have to make the case that distress sales are driving your local market if you want the agency to lower your assessment with foreclosures and short sales in mind.

Continue reading "Get your property-assessment appeal in by Tuesday" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (0)
Categories: Homestead Property Tax Credit, Property taxes
        

So many questions came in during our live-chat Q&A about the homestead credit last week that we couldn't get to them all, but I didn't want to leave people hanging. Ditto with folks who emailed questions to Midday with Dan Rodricks at WYPR that didn't get asked on air.

So here they are, with my best effort at answers.

Two people touched on a similar theme. Margaret from Baltimore asks: "What would prevent thousands of families from fleeing the city to the counties which not only have lower tax rates but also will continue to offer the homestead cap that protects homeowners?"

And Amir from Baltimore says: "These stories are great. I'm a renter and want to find the right place to maybe buy in the city. If Baltimore residents are stripped of the Homestead credit – what incentive is there to move and live for many years?"

I don't think the homestead credit would disappear in the city and remain in the rest of the state. A successful court challenge, for instance, would undo the law statewide. I doubt the General Assembly would get rid of the program on its own -- alterations are more likely -- but there too the homestead credit would probably be dealt with on a statewide basis.

Quick reminder: The homestead program caps any increases in the amount of assessed value a homeowner is actually taxed on at 10 percent statewide, allowing jurisdictions to set their own caps lower. Baltimore's is 4 percent, like Baltimore County's. Carroll, Harford and Howard counties are at 5 percent. Anne Arundel is at 2 percent.

Some counties and cities are at 10 percent -- Annapolis, Sykesville and Montgomery County, to name a few -- but most are outside the Baltimore region. So while Baltimore could raise its cap to 10 percent, it has generally been proposed as part of a plan to decrease the city's overall property-tax rate in order to increase population. Here, for instance, is a 2007 proposal from a city blue-ribbon committee that recommends such a move.

Continue reading "Homestead credit Q&A" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (0)
Categories: Homestead Property Tax Credit, Property taxes, Q&A
        

Readers have been sending in ideas for how to change the Homestead Property Tax Credit, replace it or, alternatively, how to change the entire property-tax system. It's been interesting to see, and I didn't want to keep them all to myself.

Some have come in as questions.

"It looks like we have 2 tax credits for homeowners, both designed to protect them against financial shocks from tax spikes: the Homestead Tax Credit, which you've been covering so well, and the Homeowners' Property Tax Credit, which is incapable of being enjoyed by upper income homeowners because it has an income eligibility cut-off," Steve R. wrote during the homestead Q&A this week. "Couldn't we solve the inequities you found and still maintain protections for middle class homeowners (and incentives for them to stay in their city homes) by scrapping the Homestead Tax Credit and strengthening the Homeowners' Property Tax Credit?"

Del. Sandy Rosenberg's suggestion, which we covered earlier in the week, is to keep the homestead program but inject an income element into it so that the annual cap on taxes would vary based on how much a household makes. You could still end up with people in similar homes paying very different amounts of taxes under that model, but those differences would be based on income as well as when the homeowners bought rather than just the latter.

I'll circle back to that proposal -- and reaction to it -- in a bit. (Also: Allegations of class warfare!)

A quick primer on the homestead credit: It sets a limit on how fast the amount of assessed value you're actually taxed on can increase each year. The statewide maximum is 10 percent; many jurisdictions have set their caps lower. Baltimore's limit is 4 percent. Every homeowner is eligible -- it's a tax break for owner-occupiers.

While some reader proposals focus on the homestead program, by itself or as part of an effort to decrease the city's property-tax rate, others say all the attention should be focused on the rate. It's the highest by far in Maryland (though one reader says the difference isn't quite as bad as it appears -- some counties' effective rates are higher than advertised because they add on a lot of extra charges, he says). 

Reader David Meltzer writes, "The only message that an advocate of Baltimore should be sending is that Baltimore property taxes must be HALVED in order to cure its problems. Why foster infighting among us?"

Continue reading "From different limits to 'land tax,' your fix for the homestead credit " »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (14)
Categories: Homestead Property Tax Credit, Property taxes
        

Got questions about the state's Homestead Property Tax Credit or the Sun's investigation into how it works and doesn't work?

Ask them here. We'll have a live Q&A at noon today, but you can type up your question (or questions) beforehand, too. 

On a related note: You've been commenting, tweeting and emailing various thoughts about how the homestead credit -- and the city's property-tax system overall -- could be fairer and/or better. I'm going to pull them together for a post this week (I'd hoped to do it in time for this morning but other stories interfered, including this one about a lawsuit against the Creig Northrop Team), so there's still an opportunity to pipe up.

Thanks for all the ideas! Interesting discussion.

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (7)
Categories: Homestead Property Tax Credit, Property taxes, Q&A
        

Homeowners on a stretch of Roundhouse Court in Pigtown are paying between $2,400 and $5,700 in property taxes this year.

The tax bill on one rowhome on Churchill Street in Federal Hill is $3,900, while directly across the street it's $6,500.

And on Bank Street in Upper Fells Point, you can find homeowners paying $2,900, $4,400 and $6,500, all within about a block of each other.

In each example, the neighbors' home values are basically the same. The reason their bills are not is that the Homestead Property Tax Credit caps homeowners' increases at 4 percent a year in Baltimore.

That limit has left many paying on far less than their full assessment, even with the housing bust that followed boom. Those who bought over the last several years, by contrast, have generally had no increases to cap, so they're paying full freight. You can find homestead-fueled tax-bill disparities across the state, but they're particularly notable in Baltimore thanks to its highest-in-Maryland property-tax rate.

The upside to such a cap is that it protects homeowners from skyrocketing bills. The downside is that it shifts more of the tax burden onto newer buyers and renters. (Landlords don't qualify for the break, and they pass their costs along via the rent.)

Scott Calvert and I spent several months delving into the homestead program and were amazed at what we found.

Did you know the value to recipients (and cost to the city) is $120 million this year alone? Or that the attorney general's office has for years opined that the program violates Maryland's constitution? And that hundreds of city property owners are getting credits that were inflated by mistakes or that they shouldn't be receiving at all?

Continue reading "Next door, vastly different property-tax bills" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (14)
Categories: Homestead Property Tax Credit, Property taxes
        

Heads up, city residents: If you're receiving a property-tax credit you're not entitled to, your days of artificially lower tax bills could be numbered.

Baltimore's Finance Department is asking state assessors to strip homestead credits from 2,157 properties, saying the owners don't live there even though they're collecting a tax break meant for owner-occupiers. The city intends to bill for the $1.3 million in additional taxes for the current year, plus back taxes for up to seven years.

The homestead program has for years been plagued by the problem of people receiving credits on homes they don't live in, or homes they spend some time in but don't occupy as their primary residence. Sometimes property owners collect homesteads they're ineligible for knowingly, sometimes not.

Buyers in the last few years have had to specifically apply for the credit, but longer-term owners have until the end of next year to follow suit. Until the 2007 application law, the state granted homestead eligibility based on whether the land records indicated that the property would be the purchaser's principal residence.

Here's an August story about vacant homes receiving homestead credits, follow-up No. 1 and follow-up No. 2.

If you're confused about whether you're getting the homestead credit on your property, you can look at your tax bill. Baltimore bills are available online here.

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (2)
Categories: Homestead Property Tax Credit, Vacancies
        

The state's homestead credit, a tax break designed to cap annual property-tax increases for homeowners, doesn't usually pass from one owner to the next. If Joe Schmoe buys a home from John Q. Public, Schmoe doesn't get Public's credit, other than for the rest of the tax year in which the purchased happened.

Turns out there is an exception, though. If the owner dies, his or her heirs inherit the credit as well as the house as long as they make it their primary residence.

Why? Because the typical condition for a change in the homestead situation is a "transfer for consideration" -- a sale involving money. Inheriting is not a transfer for consideration, says Robert E. Young, director of the state Department of Assessments and Taxation. So the homestead credit calculation continues on as if there were no change in ownership.

"If ... you are receiving a homestead on another property, then you're not entitled to keep it," Young added. (Homeowners can receive a homestead credit on only one property, their primary residence.)

The inheritance quirk of the homestead law came up when I was looking into claims made about a Baltimore City Council candidate, which just reminded me that however much I think I know about property taxes, there's a never-ending supply of additional information out there.

The homestead program caps annual increases in owner-occupiers' taxable assessments to varying degrees across the state. In Baltimore and Baltimore County, it's 4 percent a year. Even with the drop in home values over the last several years, some homeowners' credits are sizable -- especially people who've lived in their homes for many years. So Junior could really benefit financially from inheriting a parent's homestead credit.

Some homeowners have been surprised by another homestead-credit exception: If you make more than $100,000 in improvements to your property, you get taxed on the full amount of those improvements. This quirk has caught up several years late to some homeowners who simply bought a newly rehabbed property, and it changed their bills in a big way. More on that here.

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (5)
Categories: Homestead Property Tax Credit, Property taxes
        

The homestead credit is a no-second-helpings deal in Maryland: You can get the tax break on only one home, your principal residence. That's true for married couples, too -- just one credit.

Julie Scharper and I reported that Mayor Stephanie Rawlings-Blake and her husband collected homestead tax credits on two separate properties before she stepped up to the city's top job. Kent Blake, her husband, repaid seven years' worth of credits between January and May 2010 on a Columbia house he owns. A spokesman for the mayor said the repayments were made "without any prompting."

Clerk of Circuit Court Frank M. Conaway Sr., one of Rawlings-Blake's challengers in the mayoral primary, has been collecting homestead credits on two properties while his wife benefits from a third.

He said he didn't realize that he had been receiving the tax break on a rental property in addition to the one for his home, adding that he would pay that money back. But he declined to comment when he was asked why his wife -- the city's register of wills -- also is receiving a credit on a city property she owns.

Read the full story here.

Blogger Adam Meister has written about the Conaways' homestead credits, a fact that escaped me until after I did a deep dive into all the major mayoral candidates' property records and found problems. (I'm the opposite of a political junkie, so I hardly ever read politics blogs. Hey, I can't be a wonk in everything.)

What's probably best known about Meister's blogging: his posts about Frank Conaway's daughter, Belinda Conaway. The city councilwoman filed and then dropped a libel suit against Meister for writing that she had indicated in a document filed in the land records that a Baltimore County property she owns is her principal residence. That home also received a homestead credit. (Belinda Conaway's attorney said the document had been signed in error.)

Homestead credit double-dipping has cropped up a lot over the years, sometimes by property owners who -- for reasons explained in today's story -- don't realize they're doing it. Triple-dips, even quadruple-dips, happen, too.

Continue reading "Double-, triple-dipping on the homestead credit" »

Posted by Jamie Smith Hopkins at 12:01 AM | Permalink | Comments (15)
Categories: Homestead Property Tax Credit, Property taxes
        

The point of the homestead tax credit is to keep Maryland owner-occupiers from seeing their property-tax bills skyrocket. Nobody else is supposed to get the benefit of that tax break, but it's going to the owners of 465 homes cited by the city as vacant.

The analysis was simple: Colleague Scott Calvert and I compared the city's list of homes with vacant building notices against its list of properties with homestead credits. Total amount of city homestead credits to homes listed as vacant: $325,000.

The city sends its list of registered rentals to the state Department of Assessments and Taxation twice a year so it can be cross-checked for homestead recipients. But it hasn't been sending the vacants list and asking for the same analysis. 

After we reported this on Tuesday, the city Finance Department said it would be sending that list to the state assessors by the end of the afternoon. Challengers to Mayor Stephanie Rawlings-Blake, meanwhile, issued strongly worded tsk-tsks. The follow-up story is here.

In related tax-credit news (same story): Mayoral candidate Frank M. Conaway Sr. is receiving homestead breaks on two properties, a rental home as well as his own home. He said Tuesday that he had no idea he was getting the credit on the rental, and he notified the assessment department by email.

"I tried to pay it today, but they wouldn't let me," Conaway said. "Nobody wanted to take the money."

Loyal readers will recall that city resident Matt Gonter has spent years tracking down and reporting owners of properties with unwarranted homestead credits. Here's the 2008 story about his one-man effort and a 2009 update.

He's been prodding the city to do more on its own. Last month, the Finance Department launched a "billing integrity program" designed to catch tax cheats and those unwittingly getting breaks they shouldn't be receiving.

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (8)
Categories: Homestead Property Tax Credit, Property taxes
        

Now that property-tax bills are hitting mailboxes, I've started to hear variations on this theme: "Why the heck did my tax bill go up if my property assessment went down?"

Blame the Homestead tax credit -- that's the most likely reason, anyway. The complex system for shielding owner-occupiers from big increases has a flip side, namely that many homeowners continue to see their total-due expand in a downturn.

Here's why:

Continue reading "Property-tax bill rising? Here's one reason why" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (16)
Categories: Homestead Property Tax Credit, Property taxes
        

Baltimore City Councilman Carl Stokes submitted a charter amendment last week that would do what most readers here seem to want: cut the city's property-tax rate in half.

In an interview, he said everyone is telling him such a reduction is important -- "except the mayor and City Council."

One colleague on the council calls his proposal a "tooth fairy plan." A spokesman for Mayor Stephanie Rawlings-Blake said the idea would result in "irresponsible cuts" to an already strapped budget.

Here's what Stokes, a mayoral candidate, is suggesting:

Continue reading "Councilman: Cut Baltimore's property-tax rate in half" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (16)
Categories: Homestead Property Tax Credit, Property taxes
        

Anne Arundel County residents are getting good use out of the Homestead break: They won't be billed for property taxes on about $12 billion in assessed value in the fiscal year that starts in July, according to the state Department of Assessments and Taxation.

That's by far the top amount in the state, helped along by the county's fairly low Homestead cap. The tax break puts a ceiling on how much of an owner-occupant's assessed value can be taxed in a given year, and in Anne Arundel, the increase can't top 2 percent annually. (Statewide, the cap ranges from a high of 10 percent to a low of zero. Yes, zero.)

No. 2 for Homestead use: Baltimore County, at $6.7 billion in untaxed assessed value.

The effect of the Homestead tax break isn't spread evenly around the state, thanks at least in part to the range in caps. Six jurisdictions have Homestead-shielded assessable amounts that come to nearly 10 percent or more of their total assessable bases. (Talbot's comes to a whopping 30 percent.) But it's 1 percent or less in 10 other jurisdictions.

Here's the breakdown:

Continue reading "Who's reaping the most benefit from the Homestead tax break?" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (3)
Categories: Homestead Property Tax Credit, Property taxes
        

Wonk reader Jim, a Boston resident who bought a home in Baltimore recently for visiting his daughter on weekends, got a taste of the "bewildering" Maryland property-tax rules as he was searching for a place.

Here's what struck him:

--It's not always apparent to buyers how much they'll be paying in taxes. He found that many listings had incorrect tax amounts, either calculated on the wrong year of the three-year phase-in or noting the seller's (lower) tax burden thanks to his or her Homestead tax credit.

--The Homestead credit, which caps increases in taxable assessments for owner-occupants, is probably a key reason relatively few people appeal. Someone being taxed on $150,000 of a $300,000 assessment in Baltimore won't get a lower bill if they successfully argue that the true value is just $200,000.   

"What I found out pretty quickly was that a lot of people do not contest their assessment, which leads to a poor system," he wrote me. "Why would someone who is covered under the Homestead rule contest a high assessment? They probably like a high assessment because it doesn't cost them anything and it makes it seem like their property is worth more."

--That high assessment that's not bothering you, Mr. or Ms. Home Seller? Remember that your buyers will be stuck with the full tab. 

Continue reading "An outsider perspective on Md. property-tax rules" »

Posted by Jamie Smith Hopkins at 6:00 AM | Permalink | Comments (16)
Categories: Homestead Property Tax Credit, Property taxes
        

The state usually gets property-assessment appeals on fewer than 5 percent of homes a year. But a company that specializes in appeals thinks many more homeowners than that are overassessed.

ValueAppeal, which added Maryland to its online service in May, analyzed properties that were last reassessed a year or two ago as part of the state's three-year cycle and says comparable-home sales suggest that a quarter are significantly overassessed. Baltimore City has the highest share, the company says.

(The deadline to appeal your assessment for July 1 tax purposes is Monday -- that's when they must be postmarked -- if you aren't in the group that was just reassessed.)

Here is ValueAppeal's analysis for Baltimore-area jurisdictions:

ValueAppeal dubs a property "overassessed" if comps suggest that the overage amounts to at least $300 in extra taxes. (It set that threshold because it charges $99 for its services, after the initial free look-up to determine if you could benefit from appealing.)

The average savings calculated above accounts for the fact that some homeowners would have two years of lower taxes and some would have one, depending on where they were in the assessment cycle.

But the savings figure assumes that everyone is paying on their full assessment. Thanks to Maryland's complex Homestead tax credit system, that's frequently not the case.

Continue reading "How many homes are overassessed?" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (9)
Categories: Homestead Property Tax Credit, Property taxes
        

Maryland caps annual property-tax increases for people who live in their homes. But there's an exception for sizable home improvements -- and you really don't want to find out about it after you're on the hook.

Normally, the state's Homestead tax credit kicks in once you hit your second July 1 in your property. That means your property-tax bill can increase only up to a certain amount every year -- 4 percent in Baltimore and Baltimore County, for instance. (Full list here.)

But if you've made more than $100,000 in improvements to the property, the Homestead cap doesn't shield you from the taxman. Even if you didn't make the improvements yourself but instead bought a recently spiffed-up home that the state hasn't already reassessed, you could end up with a sizable tax hike a few years down the road.

That's the sort of thing you want to budget for. Here's how the exception works:

Continue reading "Don't get surprised by this property-tax rule" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (14)
Categories: Homestead Property Tax Credit, Property taxes, Resources for new buyers & owners
        

A Baltimore homeowner who fell behind on her mortgage payments after her property taxes unexpectedly spiked protested in an attention-grabbing way this week: She went on a hunger strike.

Lauren Rymer started just after 7 a.m. Monday and spent an empty-stomach day camped out in Annapolis, trying to get an audience with Gov. Martin O'Malley and talking to passersby who wanted to share their stories of economic woe.

By the time she ate something at 5 p.m. Tuesday, she'd had a foreclosure alternative offered to her by the state housing department, talked to someone from O'Malley's office about the tax problem and given interviews to a bevvy of media from WBAL to the Huffington Post to MSNBC about her hope that elected officials will do more to help Americans avoid foreclosure.

"Awareness has been raised on this issue, so I feel like the strike was worth it," she wrote on her Hungry4Home Twitter feed Tuesday afternoon.

Rymer, 32, who works for a nonprofit in Baltimore, bought her two-bedroom home in Upper Fells Point four years ago. She said her monthly payment started off at $1,500, including taxes and insurance, which she could afford. But it jumped to $2,100 this year after her property taxes skyrocketed, she said, and that was beyond her ability to pay.

The state Department of Assessments and Taxation, which investigated at the O'Malley administration's request, says it's the result of a little-known exception to the tax break that caps homeowners' property-tax increases at 4 percent a year in the city.

Continue reading "Homeowner, facing foreclosure, goes on hunger strike" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (47)
Categories: Homestead Property Tax Credit, The foreclosure mess
        

A colleague of mine had an unfortunate new-homeowner surprise this summer: She got her first full fiscal year property-tax bill, and the monthly cost is a lot higher than she expected based on the taxes she paid for part of the last fiscal year.

She's hardly the first to be caught off guard, thanks to the state's complex Homestead tax credit.

I did a post recently that explains how you can calculate your property-tax bill in advance to avoid a shock come July 1. But here are more details on how the Homestead credit works, since it seems to be a frequent point of confusion.

The Homestead credit is really a cap: It limits the annual increase in owner-occupants' taxable assessments, thus limiting the increase in your property-tax bill as long as rates don't change. The Homestead ceiling ranges across the state. It's 4 percent in Baltimore and Baltimore County, for instance, which means you can't see more than a 4 percent increase in the portion of your assessment you're taxed on in any one year.

There are four exceptions to the rule, the state assessors say. The cap lifts for a year if the previous assessment was "clearly erroneous," if you successfully request a zoning change that increases the property value, if you make a substantial change to the property (rehab it, for instance) or -- and this is the one that comes into play for new buyers -- if the property transfers to new ownership.

Continue reading "A property-tax reminder for new buyers" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (20)
Categories: Homestead Property Tax Credit, Property taxes, Resources for new buyers & owners
        

Psst ... better not appeal your property assessment -- the state will take away your Homestead tax credit!

It's a persistent rumor. Like many persistent rumors, it has a bit of truth all twisted out of shape.

You have to understand how the Homestead tax break works to see why this could be true, depending on the circumstances, but not in the "if you dare question us we'll show you" way that some homeowners assume.  

Here's the bottom line: If you were eligible for the tax break before you appeal, you're still eligible afterward -- but the value of your credit might drop to zero if you convince the state to lower your assessment in a big way.

Trust me, this isn't bad news. Read on to see why.

Continue reading "Busting a myth about Md. property-assessment appeals" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (10)
Categories: Homestead Property Tax Credit, Property taxes, Resources for new buyers & owners
        

You've been having a very interesting conversation about the fairness, or not, of the Homestead tax credit, which caps property-tax increases for owner-occupiers once they've been in their home a full tax year. (The idea is to prevent tax shocks for longtime owners, but it also means that their newcomer neighbors pay more. Sometimes a lot more.)

Aaron, arguing in favor of the credit, wrote: "The homestead credit encourages people to stay where they are and discourages flipping, in principle. It promotes stable neighborhoods. Whether it's high enough now to actually do that (or policed well enough) is another question. But it's not designed to make everyone's tax bills equal, or equally low, nor should it."

Jelena, who's looking for her first house, took the no-thanks view: "Taxes pay for roads, schools, emergency services, etc. If someone bought a house 30 years ago, they are using the roads today and they need to be maintained today at ... today's cost. And I agree that it's 'robbing Peter to pay Paul'."

Andy can see it both ways:

Continue reading "Thumbs up, down, sideways on the Homestead tax credit" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (8)
Categories: Homestead Property Tax Credit, Property taxes
        

Edward L. Kennedy, a Perry Hall resident, qualifies for the Homestead tax break. That doesn't mean he likes it.

His credit for the condo he moved into three years ago is $85. His neighbors, who moved in several years earlier, is substantially larger. Thus his tax bill is nearly $800 more than theirs even though their condos have identical assessment values.

"Now if that’s not fair, I don’t know what is," said Kennedy, 83.

The Homestead credit caps the annual increase in owner-occupants' tax bills. That ceiling ranges across the state; in Baltimore County, where Kennedy lives, it's 4 percent. The idea behind it is to protect owner-occupants from huge one-year spikes in their bills, but it has the side effect of pushing more of the tax burden onto newer buyers.

"You're robbing Peter to pay Paul. I’m Peter,” Kennedy says.

As colleague Larry Carson pointed out in a story in 2005, the height of the housing boom, neighbors' tax bills can differ "sharply" under this system.

Continue reading "Is the Homestead tax credit a bad idea?" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (21)
Categories: Homestead Property Tax Credit, Property taxes, Resources for new buyers & owners
        

If you're a first-time home buyer, or just buying a home in the Baltimore area for the first time, you might not know everything you need to know. Worse, you don't necessarily know what you don't know until it comes back to bite you.

A newcomer who got bitten inspired me to start collecting New Buyer 101 posts in one easily accessible place. I'll link them all to this one, adding more as they're written. Some are most helpful if you haven't bought yet, and others are intended as aids once you're already in your home. (Some long-time homeowners might find useful tips here.)

A number of readers suggested subject matter, and I'll be working through that list as I can. I'll happily take more suggestions (or requests) in the comments on this post.

One word of warning -- some of these posts were written a few years ago. I glanced through for outdated information or broken links, but please let me know if anything needs fixing. 

Here are the links:

Continue reading "Buying a home in the Baltimore area for the first time?" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (4)
Categories: First-time home buyers, Homestead Property Tax Credit, Property taxes, Resources for new buyers & owners
        

Louis Wilen of Olney will be paying less in property taxes this July than he otherwise would be, thanks to a successful appeal. And he didn't have to wait for a reassessment to register his disagreement.

As I mentioned back in December, homeowners can appeal in the midst of the three-year assessment cycle, not only when a new notice shows up in their mailboxes. Wilen is heading into the third year of his assessment period, and he was convinced his property is worth less than the state assessors' calculation of several years back.

Original value:  $526,360.

New value, post-appeal: $456,810.

That's an almost $70,000 drop, which he notes is a tax savings of about $715 -- assuming no system-wide changes, such as a rate hike.

Successful appeals don't always work out to a property tax savings for homeowners. If, thanks to the state's homestead credit, you're paying on $200,000 of a $350,000 assessment, you'd need a more than $150,000 decrease to end up with a smaller bill.

But Wilen notes that his appeal dropped him below his homestead credit amount, so he's ahead.

If you've appealed, have you had your hearing yet?

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (6)
Categories: Homestead Property Tax Credit, Property taxes
        

Adam Meister, Reservoir Hill activist and blogger, is a fan of the "constant yield tax rate" -- the rate your local jurisdiction would have to charge to bring in exactly as much money next fiscal year as it's getting from property taxes now. When a local government leaves the rate alone, it typically gets more money thanks to rising assessment values. But as Meister notes, assessment values have been falling:

It is theoretically possible that in 2011 the city may be faced with a situation where they will have to RAISE property taxes to make up for a decrease in assessments. It is highly likely that such a situation will occur in 2012.  ...

This is why we must cut government programs, fire government workers, and lower the property tax rate to the CYTR [constant yield tax rate] in 2010. If we manage our expenses correctly now, then lower assessment will not be a major issue in the future.

One interesting question -- and I don't know the answer to it -- is what percentage of residents with lowered assessments will still get annual tax-bill increases for some years to come, courtesy of the homestead tax credit.

As I've noted, and as columnist Jay Hancock spelled out, some number of residents are paying taxes on a lesser amount than even their soon-to-be reduced assessment value. That's because the homestead credit limits the assessment increase owner-occupiers pay taxes on in any one year. (In Baltimore, the cap is 4 percent.)

A Wonk reader named John commented here recently that the whole assessment and taxation system seems unfair to him:

Continue reading "Property tax and assessments: Your thoughts" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (16)
Categories: Homestead Property Tax Credit, Property taxes
        

If you're among the one-third of Maryland homeowners due to get your reassessment notice in the mail soon, odds are good -- very, very good -- that the state has revalued your property significantly downward.

As Larry Carson reports today, assessment values decreased for 93 percent of reassessed residential properties. Average drop: almost 20 percent. The state Department of Assessments and Taxation values homes once every three years, so that change is aimed at reflecting what happened to the housing market between the end of 2006 and now.

The result: smaller property-tax bills due next July ... unless the amount of your homestead credit is so large that a significant decrease isn't enough to affect your tab. In which case you'll actually see an increase as you continue to close the gap between the amount you're paying taxes on and what the state says your home is worth.

The homestead tax break, which all owner-occupiers qualify for after a full fiscal year in their homes, limits the annual property-tax increase you see. In Baltimore, for instance, the cap is 4 percent.

Thus, property-assessment decreases will most affect homeowners who bought in the last few years and the people who don't live in their properties, such as investors.

In the Baltimore metro area, the smallest residential property assessment decline came in the city -- down 5.5 percent -- and the largest in Howard County (down about 23 percent). Anne Arundel County fell almost 20 percent, Baltimore County almost 18 percent, Carroll County just under 22 percent and Harford County about 15 percent.

Allegany County was the only spot in the state with rising assessment values, though barely -- 0.1 percent.

As assessment values drop, appeal numbers probably will too. If you're unhappy with your reassessment, though, you'll want to read up on the state's instructions for appealing (and check out this how-to post I wrote a few years back).

If you're not being reassessed but want to appeal, you can do that too -- but hurry, because the deadline to be considered for the next tax year is Jan. 1. Details about this "petition for review" process here.

Posted by Jamie Smith Hopkins at 7:30 AM | Permalink | Comments (3)
Categories: Homestead Property Tax Credit, Property taxes
        

As of last night, 92 percent of you poll-takers said you agree with Baltimore economist Anirban Basu that the city's rate of $2.268 per $100 of assessed value needs to be cut now.

Six percent said not now, but when the economy's doing well.

Just two percent opted for the straight "no."

And one person felt so strongly about this that he or she skipped over the "yes" option to write in an answer: "Hell yes."

People usually like the idea of having less taxes to pay, so that was a pretty easy question for you all to answer. Now I challenge you to tackle a harder one: What cuts or adjustments should the city make to account for the (at least short-term) drop in revenue? What can the city do to avoid counteracting the "come on in" message of lower taxes with the unwelcome-mat of decreasing quality of services?

Proponents of rate reductions say a big cut would bring more residents, increasing the sources of revenue, but let's assume for this exercise that tens of thousands of people won't immediately drop everything to move in. (Also, you'll want to take into account that the city is already grappling with reduced revenues. Mayor Sheila Dixon announced in September that the city would have to "immediately reduce spending" to deal with a $60 million decline in revenue and state aid.)

Extra points to anyone with an idea more specific than "reduce waste." Here are two proposals from commenters to get you started.

Continue reading "Your take on city property taxes" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (18)
Categories: Homestead Property Tax Credit, Property taxes
        

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.

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.

Continue reading "Unearned property tax credits" »

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (11)
Categories: Homestead Property Tax Credit, Property taxes
        

Wonk reader Wick asks, "If I buy a Baltimore City home that is assessed at 100k for a purchase price of 200k, and the home was just assessed (11/08, at 100k) so is not due for re-assessment for 2 more years, will they reassess as soon as I buy the home? Or, will the 100k assessment hold until next 3-year assessment is due, and by then I'll be protected and can apply for homestead credit?"

I put the question to the state Department of Assessments and Taxation. Henry Sikorski, state supervisor of assessments, said Wick doesn't need to worry -- unless there's recent new construction on the home that the state hasn't assessed.

The state will do assessments out of cycle for major work on a home, typically over $100,000 in value. It will also reassess if a vacant lot is built upon or if the property use changes, say from commercial to condo, Sikorski said.

Paying $200,000 for a home the state assessed at $100,000 doesn't in itself prompt the state to come swooping in. "We don't go in and reassess on sales," he said.

Hope that helps, Wick (and anyone else out there pondering the same thing). Oh, and don't forget to apply for that homestead credit. New buyers have a six-month window.

Posted by Jamie Smith Hopkins at 7:00 AM | Permalink | Comments (7)
Categories: Homestead Property Tax Credit, Property taxes
        

Harford County homeowners rejoice: Your property tax rate is going down July 1.

Well, all right, it's going down less than 2 cents per $100 in assessed value -- from $1.082 to $1.064. On a $200,000 house, the new rate adds up to a bill of $2,128, or $36 less than the old rate. But I'm guessing you'd prefer that to a change the other direction.

On a related note: Harford's homestead cap, which limits how much an owner-occupant's tax bill can increase each year, dropped this year from 10 percent to 9 percent. That's still the highest in the Baltimore metro area. But County Executive David R. Craig says on his blog, "The next step is to reduce it from 9% to 5% by the FY11 budget (calendar year 2010)."

Values aren't going up 10 percent or 9 percent or even 5 percent right now. Still, homeowners whose housing-boom values haven't been fully phased in (even accounting for dropping home prices) could see an impact from this change.

I've heard a lot of grumbling about property tax rates over the years, particularly from Baltimore residents, but some Harford Countians went beyond grumbling and started protesting. Harford Property Tax Revolt organized rallies this spring, complete with signs like "Will Work for Lower Taxes." (This Dagger article about a May rally drew 45 comments.)

The old debate during a recession is (a) lower tax rates to help residents in their time of trouble, (b) leave tax rates alone to try to avoid big cuts in services that residents need in their time of trouble or (c) raise taxes to maintain or increase services that residents need in their time of trouble.

What argument do you prefer?

Posted by Jamie Smith Hopkins at 8:49 AM | Permalink | Comments (14)
Categories: Homestead Property Tax Credit, Property taxes
        

You may have run into this before: real estate ads trumpeting property-tax bills that aren't anywhere near what you -- the prospective buyer -- would pay, because they're what the seller is paying after years of homestead-credit protection.

Maryland's tax break for owner-occupants keeps the property tax bill from rising more than a certain amount each year. In Baltimore, for instance, the homestead cap is 4 percent. But the credit doesn't transfer from one owner to the next, so a new buyer will get a bill that reflects the full assessment.

This can be a nasty shock if you didn't realize it and weren't budgeting for it.

As Julie Bykowicz reports, city real estate ads will have to take that into account in about three months. That's when a new ordinance goes into effect to put the kibosh on "misleadingly low figures." (We could call it the "read my lips: no old taxes" rule.)

The ordinance, the story says, requires that "tax figures in ads must be a reflection of the property's most recent assessment multiplied by the city property tax rate of $2.268 per $100 of assessed value."

What do you think of that?

Posted by Jamie Smith Hopkins at 9:31 AM | Permalink | Comments (7)
Categories: Homestead Property Tax Credit, Property taxes
        

This is the flip side of the Homestead Credit, which caps annual property tax increases. When home prices are skyrocketing, your taxes reflect only part of that rise. But you'll be catching up with the unpaid part of the increase later when prices stagnate -- and even when they drop. (It's only when your property assessment and your tax burden equal out that your tax bill figure stays put.)

As Larry Carson reports, "a house that jumped 50 percent in value when it was reassessed in 2005, for example, would take 10 years to reach full value if the annual cap is 5 percent or less, as it is in 15 of Maryland's 24 jurisdictions." His article notes that "virtually all" of the 700,000-plus property owners recently reassessed will have a bigger tax bill this year.

Carson, property tax reporter extraordinaire, reports in another story that Baltimore City's reassessed neighborhoods saw a big increase in taxable values even as some parts of the state declined:

While appraisals were nearly flat statewide for property overall - and even dipped in the more prosperous suburbs - values for homes in the third of Baltimore that will receive the notices rose 21.4 percent since their last assessment in 2005.

State assessors said home values rose 9.7 percent in eastern Baltimore County, 5 percent along the U.S. 40 corridor in Harford County, and 2 percent in the reassessed area of Carroll County. Home values dropped 4.2 percent in Anne Arundel, 7 percent in Howard and 16.3 percent in Montgomery County.

Think your reassessed value is wrong? You can appeal.

Read a How-to from the end of '07 on property tax appeals or go to the state's appeal page for information.

Looking for tax information specific to your community? Go HERE for homestead caps across Maryland and HERE for local property tax rates (as of July 1, 2008).

Posted by Jamie Smith Hopkins at 1:00 AM | Permalink | Comments (6)
Categories: Homestead Property Tax Credit, Property taxes
        

The legislators, Democrats and at least one Republican, are pleading ignorance: They said they didn't know they were getting the tax break.

Del. Don H. Dwyer Jr., an Anne Arundel Republican who received breaks on two homes he doesn't live in, told Dechter that people who don't qualify for the credit shouldn't be getting it, himself included:

"Clearly, it's very easy" to have subverted the tax credit before the law change, Dwyer said. "When you have members of the legislature that have been in the same boat and don't even realize it, how many other homeowners do you think are in the same situation?"

Posted by Jamie Smith Hopkins at 5:34 PM | Permalink | Comments (0)
        

The city will send letters to residents in the next two weeks. Exactly how many will receive the letter is not yet clear, but a Dixon spokesman said it will likely be shy of 2,000.

The city expects the refunds will cost between $250,000 and $300,000. It was not clear Thursday how the city will pay for that unexpected expense.

Posted by Jamie Smith Hopkins at 9:05 PM | Permalink | Comments (0)
Categories: Homestead Property Tax Credit, Property taxes
        

Image courtesy of StockXCHNG, produced by kikashi

So you've bought a house -- now what?

A Wonk reader had the excellent suggestion that new homeowners could use a few pointers about, well, being new homeowners. It's one of those potentially never-ending lists, so please add your thoughts where I leave off.

First up on the list: Dotted lines awaiting your signature.

Continue reading "How-to Monday: What to do after you buy" »

Posted by Jamie Smith Hopkins at 4:00 AM | Permalink | Comments (4)
Categories: Homestead Property Tax Credit, How-to Mondays
        

But Tim Wheeler reports today that a significant number of landlords appear to be getting the benefit of the homestead tax break:

A spot check by The Sun of about 90 homes listed online for rent in Baltimore and Howard counties found that 1 in 3 is identified in state records as the owner's principal residence. That means the owners of those rental properties claim to be living there, potentially allowing them to get a Homestead Tax Credit they don't deserve.

State officials say "there's no easy way to check" who's honestly qualifying for the credits, Wheeler reports.

I know some of you folks out there are very interested in this issue. What do you think the state ought to do?

Posted by Jamie Smith Hopkins at 1:12 PM | Permalink | Comments (2)
        

This calculation, called the "constant yield tax rate," is a popular one for those frustrated that reassessments mean higher tax bills. I've already received two emails this morning pointing out that Baltimore's rate would drop from $2.268 for every $100 in taxable assessed value to $2.079 if city leaders go with the constant yield rate.

All the counties' rates would decrease, too. That's what happens when the assessable base expands.

As the state notes: "If a jurisdiction plans to set a tax rate higher than the constant yield rate, the jurisdiction must advertise the tax increase and hold a public hearing before setting the tax rate for fiscal 2009." (Fiscal 2009 begins July 1.)

If my math is right, the constant yield rate is truly constant -- no adjustment for inflation. Governments always see that as a cut because they say it means less in the way of services. City tax protesters, on the other hand, have argued that the revenue increases from property taxes have been well above inflation in recent years.

Property taxes are bound to be an issue this year as the city considers changing its tax structure. (Click HERE for an earlier post on the city's blue-ribbon tax reform committee.)

Meister, who ran for city council last year, said in an email on the subject: "The 2.079 rate is an 8.33% cut from the current rate of 2.268. We get an 8.33% cut by simply following what the state says. There is no need for changing the homestead tax credit, creating blue ribbon committees, legalizing gambling, or raising income taxes!"

Posted by Jamie Smith Hopkins at 9:59 AM | Permalink | Comments (3)
        

He can't help but notice that his notice urges him to apply within 60 days, and he saw a reference in the Maryland code that failure "to provide the requested information within 30 days from the date of a request shall result in a dwelling being designated as non-owner-occupied for purposes of the Homestead Property Tax Credit."

C. John Sullivan Jr., director of the state Department of Assessments and Taxation, says it really, honestly and truly is 2012 -- for everyone who bought their house by Dec. 31, at least. After that date, new home purchasers have six months to apply.

Sullivan said the state will send out a series of reminder letters to those in the owning-by-'07 crowd who haven't applied. He said he meant it when he told homeowners not to panic.

"When tax bills go out July 1 in the various counties, no one's going to lose their homestead credit because we do not have an application," Sullivan said.

"But the response has been unbelievable," he added.

The department has already received six duffel bags worth of applications by mail, and he expects the online tally will hit 10,000 by Monday.

Posted by Jamie Smith Hopkins at 10:01 AM | Permalink | Comments (0)
Categories: Homestead Property Tax Credit, Property taxes
        

The industrious John Fritze, who got an early copy of the report, reports today that the change "could cost many city homeowners thousands more a year."

If all of the panel's short-term recommendations were adopted, the rate would be cut to $2.017 per $100, which would still be the highest in the state. Officials say the reduction could be made within two years. ... A proposal to lift the annual cap on the increase in assessments on principal residences, known as the Homestead Tax Credit, from 4 percent to 10 percent is likely to be among the most controversial of the panel's ideas. It would cost taxpayers $24.2 million, the report says. That money, in turn, would be used to reduce the tax rate by about 4 percent.

Even with a reduced rate, that plan would force many residents to pay significantly more if their home values continued to climb as they have in the past several years. Under one scenario presented by the committee, the owner of a $300,000 home that increases in value by 25 percent every three years would pay thousands more in taxes.

If I understand the recommendations correctly, the plan would seem to be better for homeowners in a low-appreciation housing market and worse in a high-appreciation one. And it would be better overall for small landlords, who don't get the homestead cap anyway. (This doesn't take into account a proposed increase to the income tax rate to 3.2 percent from 3.05 percent, since I can't easily factor in that effect.)

But -- as a smart co-worker pointed out -- many homeowners are taxed on much less than their full assessed value right now because all those big increases during the housing boom were capped at 4 percent a year. In other words, it'll take some time to "catch up." That means plenty of folks would see 10 percent increases a year for a while if values don't plummet.

Well, Wonk readers? What do you think? The report is being pitched as "ready for public comment" rather than a done deal.

Posted by Jamie Smith Hopkins at 9:37 AM | Permalink | Comments (10)
Categories: Homestead Property Tax Credit, Property taxes
        

 Sun photo 

If you have a house, you have a property tax bill. Any day now, a third of Maryland property owners will be getting letters about a reassessment of the value that helps determine that tax.

You may have it in hand already, if your mail person is swift: The state Department of Assessments and Taxation sent the 728,185 notices out on Friday. The parts of the Baltimore area that are being reassessed this time 'round are northwestern Anne Arundel; the middle section of Baltimore City; the north and middle parts of Baltimore County; northeastern Carroll; the middle part of Harford; and both southern and western Howard. (You can find maps HERE.)

There's always some anger and frustration when new assessments hit, but the odds of furious screams are much higher in this time of slumping sales and soft prices. Why, you might wonder loudly, doesn't your new assessment reflect the fact that prices are stagnant or in some cases falling?

Continue reading "How-to Monday: Assessments and appeals" »

Posted by Jamie Smith Hopkins at 4:00 AM | Permalink | Comments (8)
Categories: Homestead Property Tax Credit, How-to Mondays, Property taxes
        

As Carson reports, "a little-noticed change in Maryland's property tax laws has converted this protection from an automatic benefit to one that each homeowner must apply for -- although most homeowners will have five years to file the paperwork."

The new law is intended to identify ineligible property owners who are illegally taking advantage of the caps, but critics say it is an overreaction that could put homeowners at risk of higher taxes.

Failure to apply for the tax credit, which is limited to a taxpayer's primary residence, can be costly. Maryland's Homestead Tax Credit law puts a 10 percent limit on the amount of a home's increased value that can be taxed each year, and many jurisdictions have lower ceilings.

Here's the deal: If you already own a house, you'll get a notice to apply with your next assessment letter. A third of homeowners will get letters within the next 30 days; everyone else will get them a year from now or two years from now, since the reassessment cycle is a three-year one.

The story notes that people have "until Dec. 31, 2012, to apply, except for those who buy homes after Dec. 31, who must apply within 180 days of the purchase."

Posted by Jamie Smith Hopkins at 11:28 AM | Permalink | Comments (0)
        

Photo copyright FreeFoto.com 

So you're buying a new house but thinking about renting out your current place rather than selling it. Naturally you've read last week's How-to post, so you have some food for thought about the joys and headaches of becoming a landlord. But how are you going to finance your move if all your equity is tied up in your old home?

Continue reading "How-to Monday: Renting vs. selling, part II (financing)" »

Posted by Jamie Smith Hopkins at 8:14 AM | Permalink | Comments (4)
Categories: Homestead Property Tax Credit, How-to Mondays