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Homestead tax credit deadline bill introduced

Bills were introduced Thursday in both chambers of the General Assembly that propose extending the deadline to apply for the Homestead Tax Credit until June 1.

Many homeowners did not meet the Dec. 31 deadline, excluding them from hundreds of dollars in potential savings on their upcoming tax bill, according to elected officials and community leaders.

The bills, Senate Bill 158 and House Bill 128, need a three-fifths vote in each chamber and would go into effect upon the governor's approval. A senate committee hearing on the legislation is scheduled for Feb. 6.

The senate bill is being sponsored by Baltimore city representatives, all Democrats. The house bill's sponsors are from across the state and include one Republican, Del. Michael A. McDermott of Wicomico and Worcester counties.

Here's some background on the credit, from a story I wrote last year about the impending deadline:

The homestead credit limits the amount a primary residence's tax assessment can increase each year. The limit varies by jurisdiction. In Baltimore and Baltimore County, for instance, there's a 4 percent cap — meaning the credit prevents a home's assessment from increasing by more than 4 percent each year.

For about 30 years, the homestead credit was just there. It was applied automatically at the time of purchase to any homeowner's principal residence. Property owners never had to give the credit a thought; it was taken care of for them.

In 2007, though, the General Assembly decided the automatic nature of the process was a problem. Too many ineligible property owners were receiving the credit — on second homes or investment properties, for example.

All of those undeserved deductions were robbing the state's treasury of revenue, legislators said. So the new law wiped the homestead tax credit slate clean and homeowners were given more than five years to submit a one-time application for the credit.

Marylanders who bought a home before 2007, most of whom long received the credit, were given until Dec. 31 to submit an application before their credit was taken away for the tax year that begins in July. 

Since the legislation's passage, home purchasers receive a homestead application by mail from the State Department of Assessments and Taxation.

The new process is intended to eliminate ineligible homes from the credit's registry. But it also eliminates the credit for eligible homeowners who fail to submit an application.

Extending the deadline would create complications for the tax department, said Robert E. Young, Maryland's director of assessments and taxation.

Because of the timing of the tax billing system, counties would have to issue some revised tax bills in fall 2013, he said. That's confusing for taxpayers and will cost more for the counties, he said.

Plus, the current deadline is written to be forgiving, Young said. Homeowners who miss the Dec. 31 deadline will be allowed to apply next year and receive the benefit in 2014 as if they'd never lost it. 

Have a real estate news tip or experience to share? Email me at steve.kilar@baltsun.com.

Copyright © 2014, The Baltimore Sun
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