Wednesday, Jan. 9, 2008

Homeowners now must apply for state property tax credit

Homeowners have until 2012 to sign up for the credit

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Homeowners used to receiving an automatic state property tax credit will have to apply for the credit under a law passed last year aimed at preventing tax fraud.

In a onetime application, homeowners will have to prove that a property is used as their primary residence in order to receive the state Homestead Tax Credit.

As property values have increased over the past several years, so have state tax assessments. The Homestead Tax Credit caps the amount of a home’s increased value that can be taxed each year at 10 percent.

For residents in counties such as Montgomery that operate their own local credit programs, eligibility for the state credit is directly tied to the local program. The county also offers a separate credit for low-income homeowners and one for senior citizens, based on a separate state application. Also last year, county homeowners received a $613 property tax rebate. Key to all of the programs is the requirement that the credits apply only to principal residences.

Del. Anne R. Kaiser sponsored the application legislation to curb tax fraud from homeowners claiming the credit for properties, such as vacation homes and rental property that are not considered principal residences.

‘‘Any time there are people abusing the system and avoiding paying their share of taxes it makes honest taxpayers pay more,” said Kaiser (D-Dist. 14) of Burtonsville.

The legislation took effect in October and this year affects the third of the state’s homeowners who received property tax bills in December. The law gives homeowners five years to submit the application. If not filed by 2012, they would be liable for the full amount of their tax bills. Residents who bought a home after Dec. 31, 2007, have 180 days to file the tax credit application.

As word has circulated about the requirement, there has been concern that the process is difficult and that seniors will not understand the process, Kaiser said.

‘‘We made a point of making this a five-year process. In the first three years we’re hitting people with the information in assessment notices. The fourth and fifth years are for customer service and follow-up,” she said. ‘‘If you deserve to get the credit this year and don’t reply, you will not lose it. No one is kicked off for not replying, but [they] will get kicked off when trying to claim another property as their primary residence.”

County officials are working with the state to alert homeowners to the rule change, said Robert Hagedoorn, chief of the county’s treasury division. ‘‘The last thing that any of us want to see happen is for people to lose the credit,” he said.

As of Monday, 16,500 people across the state had filed for the credit online and the state assessment office was processing another 10 duffel bags of applications, said C. John Sullivan Jr., state director of assessments and taxation.

‘‘What is unique is that the [Homestead Credit] is the only tax credit in the history of the state that you did not have to apply for ... so most people didn’t even know they were getting the credit,” he said.

In fiscal 2003, about 268,000 homeowners received the credit statewide. For fiscal 2009, which begins July 1, the number is expected to grow to about 1.4 million homeowners. In Montgomery County, the 21,609 homeowners receiving the credit in fiscal 2003 will jump to just over 30,000.

The growth is attributed to rising property values, Sullivan said.

With property tax assessments in the county rising about 16 percent in three years, Hagedoorn said, most of the county’s homeowners have received the Homestead Credit.

How to getthe tax credit

Homeowners receiving tax bills dated Dec. 28 may apply for the state Homestead Property Tax Credit by:

Mailing the application included in the tax bill

Applying online at⁄homestead

Printing and mailing the application on the state Web site at⁄sdatweb⁄Homestead_application.pdf

Calling 410-767-2165

Homeowners not reassessed until 2009 or 2010 can wait until then to apply for the credit or they can apply now. All homeowners wishing to receive the credit on their primary residences must apply by 2012.