Maryland Assessments Fall Almost 20%

December 29, 2009 by Cato  
Filed under Fiscal Policy, Maryland, Maryland Politics

This year’s property assessments go out in the mail today to Maryland property owners.  For those reassessed this year (Maryland automatically reassesses real estate on a revolving three year schedule), property owners will see an average decline of 19.7%.  Don’t expect a drop in your tax bill though.  Because of the way Maryland calculates its “Homestead Tax Credit”, it would take several years of declining property values to see an actual reduction in your property tax bill (if rates remain the same).

Many homeowners will not see corresponding declines in their tax bills come July 1, however, officials warned, unless local governments reduce the tax rate, which is unlikely because they need the revenue.

Many residents are paying taxes on only a fraction of their home’s assessed value because the state’s Homestead Tax Credit program caps the amount of increase that may be taxed each year. As home prices climbed rapidly early in the decade, owners were protected from sudden jumps in tax bills. While statewide the cap is set at 10 percent, most jurisdictions have lower ceilings.

In some jurisdictions, home owners can actually expect a rise in their property tax bills despite the precipitous decline in home values:

"Unless they bought a home in the last two years, they will still see an increase in property tax," said Raymond S. Wacks, Howard County’s budget director, because the county’s cap is suspended on newly purchased homes for one year. That revenue cushion may disappear in another year or two, however, if prices continue to fall, he warned. Anne Arundel officials expect a similar scenario, despite the 19.7 percent drop in home prices from Annapolis north. Overall values, of residential and commercial properties, in Arundel declined 17.9 percent.

"It will have minimal impact" on revenues, Anne Arundel County Executive John R. Leopold said, because of his county’s 2 percent annual assessment cap.

In Wicomico County, home of Delmarva Dealings, assessments fell over 18% – slightly less than the state average.  Rather than a lower homestead tax credit, Wicomico has a 2% revenue cap.  Revenue from real property taxes may only rise 2% or the increase in the cost of living, whichever is less.  In the current fiscal year, property tax revenue was only allowed to rise 0.1%.