Understanding the Maryland Homestead Property Tax Credit
What Every Maryland Homeowner Should Know
Rising home values are generally good news for homeowners—but higher assessments can also lead to higher property taxes. That’s where Maryland’s Homestead Property Tax Credit Program comes in. This long-standing program is designed to protect homeowners from sharp increases in property taxes on their primary residence.
Below is a clear, plain-English overview of how the Homestead Tax Credit works, who qualifies, and why it matters.
What Is the Homestead Property Tax Credit?
The Homestead Property Tax Credit helps limit how much your taxable assessment can increase each year on your principal residence.
While your home’s market value may rise significantly due to neighborhood appreciation or market conditions, the Homestead Credit caps how much of that increase is subject to property taxes.
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State law requires all Maryland counties and municipalities to cap annual taxable assessment increases at 10% or less
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Many local governments choose an even lower cap, offering additional protection
In short: you don’t pay property tax on the portion of your home’s value increase that exceeds the cap.
Important Distinction: Market Value vs. Taxable Assessment
The Homestead Credit does not limit how much the state can assess your home’s market value. Instead, it limits how much of that increase is used to calculate your property taxes.
Think of it as a shield that blocks large jumps in taxable value, even in a strong real estate market.
A Simple Example
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Previous assessment: $100,000
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New phased-in assessment: $120,000
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Maximum taxable increase (10% cap): $110,000
That extra $10,000 ($120,000 – $110,000) is not taxed.
If the tax rate is $1.04 per $100, the credit would reduce the tax bill by $104 for that year.
Who Is Eligible?
The Homestead Property Tax Credit is available to homeowners who meet the following conditions:
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The home is the owner’s principal residence
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The owner lived in the home for at least six months of the year, including July 1
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The property was not transferred to new ownership during the prior tax year
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There was no major change in zoning or property use requested by the homeowner
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The assessment was not clearly erroneous
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The credit applies to one property only
Temporary absences due to illness or special care do not automatically disqualify a homeowner.
Special Situations: Major Renovations or Rebuilding
Homeowners who temporarily vacate their residence to:
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Raze and rebuild the home, or
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Make substantial improvements
may retain Homestead eligibility, provided:
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The home was owned and occupied as a principal residence for at least three full tax years before construction began, and
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The new home or improvements are completed by the next succeeding tax year.
Why This Matters for Buyers and Sellers
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Homeowners benefit from predictable property taxes, even as values rise
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Buyers should be aware of the credit when planning long-term affordability
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Sellers often gain an advantage marketing homes with stabilized tax histories
Maryland law now requires real estate contracts and settlements to disclose the Homestead Tax Credit to buyers—underscoring how important it is in long-term homeownership costs.
Checking Your Homestead Status
Homeowners can verify whether their property has an approved Homestead status through the state’s real property records maintained by the Maryland Department of Assessments and Taxation.
If a property shows an approved or received status, no further action is required.
Final Thoughts
The Maryland Homestead Property Tax Credit is one of the most valuable—yet often misunderstood—protections available to homeowners. Whether you’ve owned your home for decades or recently purchased, understanding how this credit works can help you better plan for taxes, budgeting, and future real estate decisions.
If you’re buying, selling, or simply reviewing your long-term housing costs, it’s always smart to factor the Homestead Credit into the conversation.
For homeowners navigating Maryland real estate, informed decisions always lead to smarter outcomes.