From the Real Estate Wonk blog:
Wonk reader Jim, a Boston resident who bought a home in Baltimore recently for visiting his daughter on weekends, got a taste of the "bewildering" Maryland property-tax rules as he was searching for a place.
Here's what struck him:
--It's not always apparent to buyers how much they'll be paying in taxes. He found that many listings had incorrect tax amounts, either calculated on the wrong year of the three-year phase-in or noting the seller's (lower) tax burden thanks to his or her Homestead tax credit.
--The Homestead credit, which caps increases in taxable assessments for owner-occupants, is probably a key reason relatively few people appeal. Someone being taxed on $150,000 of a $300,000 assessment in Baltimore won't get a lower bill if they successfully argue that the true value is just $200,000.
"What I found out pretty quickly was that a lot of people do not contest their assessment, which leads to a poor system," he wrote me. "Why would someone who is covered under the Homestead rule contest a high assessment? They probably like a high assessment because it doesn't cost them anything and it makes it seem like their property is worth more."
--That high assessment that's not bothering you, Mr. or Ms. Home Seller? Remember that your buyers will be stuck with the full tab. "So while the seller of my place is paying $6,000 a year in taxes, I'm scheduled to go to $12,000 next year," Jim writes. "If my appeal wins, I would be paying more like $9,000, but still $3k less than scheduled."
--Not that this will surprise any locals, but city property-tax rate: Ouch.
"In Boston, which is a high cost city, especially in real estate, property taxes run approximately 1% of a home's actual market value, so Baltimore's taxes really shocked me," Jim notes. "To pay $400,000 for a condominium and pay $12,000 in taxes is unreal. On my primary residence in Boston, valued at $1.1 million for taxes, I pay about $10k in taxes with the local homeowner exclusions."
(On a side note, this much-discussed analysis of Baltimore's tax rate has comparisons to Boston. Stay tuned for a Q&A; with one of the authors.)