Maryland homeowners could lose out on hundreds of dollars in tax bill savings if they miss a deadline that's a week away.
Many may not realize they must sign up for the Homestead Tax Credit, which saved the average Baltimore homeowner more than $1,000 in the most recent tax year. To receive the credit in property tax bills starting this July, homeowners must sign up by Dec. 31.
"When you say the words 'tax credit' to some homeowners, it doesn't really resonate what they're getting out of it," Baltimore City Councilman Nick Mosby said.
That's why Mosby, other politicians and community leaders are spreading the word that homeowners must submit the one-time Homestead Tax Credit application — or prepare to part with a potentially substantial sum. There's even a legislative proposal to extend the deadline, which has been in place for nearly 51/2 years.
"It's always been something that's just been there," Mosby said of the homestead credit, which 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.
Mosby's right — 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. The Baltimore Sun reported last year that hundreds of Baltimore property owners were receiving the credit on multiple properties. The state ultimately revoked credits worth $730,000 in response to that report.
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.
Marylanders who bought a home before 2007, most of whom long received the credit, have until Dec. 31 to submit an application before their credit is taken away in the tax year that begins July 2013. Those who purchased a home since the legislation's passage 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.
"I'm not one of these people who's going to miss an opportunity to save money," said Joseph Hawkins, who has been in his Bethesda home since 1984. But, he said, he has no idea whether he's been receiving the credit all these years, because when he looks at his tax bill he's focused on the bottom line.
Had a friend not mentioned the homestead application, Hawkins said, he and his wife might have missed the deadline.
He thinks the state has done a poor job notifying homeowners of the need to apply.
"What's the incentive for the state to make me aware of this?" Hawkins said.
After all, he added, every dollar the credit saves him is a dollar the state loses.
Since 2007, the state has mailed every homeowner multiple notices of the deadline, said Robert E. Young, Maryland's director of assessments and taxation. For most homeowners, the notices were tucked into assessment notices.
In West Baltimore, many residents have not heeded these notices, said Gwen Shelton, president of the Matthew Henson Neighborhood Association, which has launched a door-to-door campaign to get homeowners registered.
Through the tax department's website, anyone can see whether a homeowner's application for the credit has been processed. This allows Shelton to make certain that everyone in her neighborhood has submitted an application.
Shelton enlisted students at the neighborhood's Carver Vocational-Technical High School to look up, address by address, every home in the neighborhood. The students record every address not registered for the credit, and Shelton sends volunteers to the door with a blank application.
"It can amount to a lot of money that people don't have," said Shelton, explaining the reason for her grassroots campaign. "It looks like a lot of people haven't filed."
About 25 percent of city homeowners who received the homestead credit in the most recent tax year have not applied, Young estimates.
At most, there are 1.47 million owner-occupied homes statewide that are eligible for the homestead credit, he said. As of mid-December, about 940,000 applications have come in from across the state.
As assessments decrease, the value of the credit declines, too. Since property assessments dropped the past few years, only 482,000 property owners are expected to see any financial benefit next year — far fewer than in the past, he said.
Still, Young estimated about 125,000 homeowners might miss out on some benefit if they don't apply.
The online database that records processed applications has been an assurance to homeowners who applied some time ago, but those who applied in recent weeks cannot expect the database to be updated with their information before the Dec. 31 deadline, Young said.
It will be many months into the new year before all of the applications have been reviewed and the database reflects those submissions, he said.
Others have taken on outreach programs similar to Shelton's. Maria Wolf, a real estate agent who lives in Olney, has been checking the tax department's online database with her clients' and neighbors' addresses and getting in touch with them if it shows a homestead application has not been processed for their property.
"It's staggering how many people have not done it. It's a big chunk of money," Wolf said.
Some homeowners have experienced problems with the process, such as delays after requesting a confidential access code that is required to apply online. The unique codes were sent out by mail to homeowners in their assessment notices, but many people threw away or misplaced them, and now need their codes re-sent.
The code, intended to protect homeowners from false applications being submitted on their behalf, is not required on the paper version of the application, which requires a signature to guard against fraud.
Annapolis homeowner Brad Pitt requested an access code from the state at the beginning of November. It took weeks to receive it, he said, and when it arrived it wasn't recognized by the Web application form. Eventually, he opted to mail in a paper application.
"If I am having this much trouble, I cannot imagine my parents getting through this process," Pitt said.
The delays in responding to code requests, processing applications and responding to emails reflects a lack of staff, Young said. Eight people work on homestead credit issues in the tax department's headquarters, he said.
During October and November, the homestead team was answering 200 calls an hour and receiving hundreds of email requests each day, Young said. They're overwhelmed, he said.
"They don't have the staff they really need for the final push," said City Councilwoman Mary Pat Clarke, who also has been encouraging people to register before the deadline. "They're doing the best they can."
Although there is still time to get an application in, at least one legislator is concerned not enough people will hear about it by the end of the month.
State Sen. Joan Carter Conway plans to introduce legislation in January to extend the homestead credit application deadline until June 1, 2013.
"I have already drafted the legislation," Conway said. She plans to bring it up at the beginning of the General Assembly session, which begins Jan. 9.
Extending the deadline would create complications for the tax department, Young said. 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.
The current deadline is written to be forgiving, Young added. 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 you applied for the Homestead Tax Credit?
To determine if you have already submitted an application for the Homestead Property Tax Credit, go to the state tax department's real property database at http://sdatcert3.resiusa.org/rp_rewrite/. Choose your county from the drop-down menu and search for your home by street address. At the bottom of the tax information page about your property is a box titled "Homestead Application Information." If you have already applied, and you application has been processed, there will be an indicator to the right of "Homestead Application Status."
Source: Maryland Department of Assessments and Taxation
How to apply for the Homestead Tax Credit
Over the past few years, most homeowners have submitted their one-time application. But for those who have not, here's how to meet the Dec. 31 postmark deadline:
•Apply online: Find your most recent tax assessment notice. It will have a confidential access number printed on it that you can use to apply for the tax credit over the Internet. Go to https://sdathtc.resiusa.org/homestead/ in a Web browser to fill out the application. You will receive an email confirmation at the end of the process that will provide proof the application was submitted.
•Apply by mail: You may have a paper copy of the homestead credit application. It was sent out to all homeowners. If you didn't hang onto it, you can download and print a copy by going to http://www.dat.state.md.us/sdatweb/Homestead_application.pdf in an Internet browser. You do not need a confidential access number to apply with a paper form. Send in your application to the address on the application. At the post office, ask to have the application sent with a Return Receipt, which will provide you with proof of delivery.
•Apply in person: Because the Maryland Department of Assessments and Taxation will be closed on Dec. 31 and Jan. 1, people will be able to hand-deliver their homestead applications to the department's office on Jan. 2. The office is located on the 8th floor of 301 W. Preston St. in Baltimore.
•Apply by fax: Completed paper applications can be faxed to the tax department at 410-225-9344.