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Are You Receiving the Property Tax Reduction You Should Be?

Did you know you could get some tax relief on your property if you’re a homeowner in the District or Maryland? (Unfortunately, Virginia doesn’t have any property tax reductions like DC and Maryland).

These local Homestead programs will reduce your property taxes for being a homeowner occupant in a residential property. You MUST apply to these programs in order to get this benefit. Let’s take a look:

DC’s Homestead Deduction

DC’s Homestead Deduction reduces your real property’s assessed value by $72,450 prior to computing the yearly tax liability.  That ends up saving you a little over $600 per year on your property taxes!  In addition, there is a cap on how high your property tax bill can jump from year to year if you are a homeowner occupant.

That’s why you see the property taxes so drastically different in the same neighborhood on listings—if a homeowner has lived in the property for a long time, their taxes are lower and you will have the same benefit if you stay in the home for a long time too.

To Qualify:

  • An application MUST be on file with the Office of Tax and Revenue (one-time application), typically done at settlement (see below);
  • The property must be occupied by the owner/applicant and contain no more than five dwelling units (including the unit occupied by the owner); and
  • The property must be the principal residence of the owner/applicant.

How to Apply:

Typically you apply at settlement. However, check your recent tax bill (about half-way down page) to see if it says you are receiving the Homestead Deduction. Once you apply for the first time, you don’t need to apply again.

If your approved application is filed from October 1 to March 31, the property will receive the deduction for the entire tax year (and for all tax years in the future). If a properly completed and approved application is filed from April 1 to September 30, the property will receive one-half of the deduction reflected on the second installment (and full deductions for all tax years in the future).

If you are an owner occupant in DC and are not receiving this great benefit, get your application here or contact the Office of Tax and Revenue at (202) 727-4TAX (727-4829).

For more information about this program, visit the DC government website here.

Maryland’s Homestead Tax Credit

Maryland’s Homestead Tax Credit doesn’t reduce your assessed value but requires local jurisdictions to limit taxable assessment increases to 10% or less each year. That means you don’t have to pay property taxes on the market value increase if it’s above the limit.

Here is an example from the Maryland website:

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).

To Qualify:

The tax credit will be granted if the following conditions are met during the previous tax year.

  • 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.
  • 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.
  • An owner can receive a credit only on one property—the principal residence.

How to Apply:

All homeowners must submit a one-time application to establish eligibility for the credit. You can access an application here.

For more information you can call 410-767-2165 in the Baltimore metropolitan area or 1-866-650-8783 toll free elsewhere in Maryland. Or email: sdat.homestead@maryland.go

For more information on this program, visit Maryland’s website on taxation and assessment here.

If you live in DC or Maryland, be sure you are receiving these important property tax savings! 

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