Maryland homeowners who believe that the nation's housing slump will lead to a decline in their annual property tax bills will be in for quite a surprise this week, according to state and county officials.
Though sale prices are declining in many neighborhoods, virtually all of the more than 700,000 Maryland residents set to receive their new property assessments later this week will still be paying higher taxes in 2009, the officials say.
This year's tax bills will rise even for many homes with declining value because tax collectors are catching up to the huge increases in assessed values from earlier in the decade.
While Maryland's Homestead Tax Credit prevents homeowners from being hit with the full impact of higher reassessments in a single year, it also ensures that tax bills are likely to keep increasing even when the housing market stagnates or declines.
So a house that jumped 50 percent in value when it was reassessed in 2005, for example, would take 10 years to reach full value if the annual cap is 5 percent or less, as it is in 15 of Maryland's 24 jurisdictions.
But many homeowners don't understand, said C. John Sullivan, director of the Maryland Department of Assessments and Taxation. They are expecting lower tax bills if their properties are among the third of Maryland homes set to receive new assessment values this week. State officials are expected to release reassessment data for Maryland just before the new year.
"When I run into people on the street, they always say, 'Property values are going down. When are you going to lower my assessment?' " Sullivan said.
That's what Harold Lloyd said he believes should happen this year.
The northern Baltimore County state tax agency retiree has spent years helping people fight rising home assessments and said increases in this market would surprise him, though he hasn't seen the state's numbers.
"I don't see why assessments should go up at all," he said. "I feel they're not recognizing the free-fall in the market."
Sullivan said his agency has tracked 70,000 home sales since last year, which show the market may have slowed but is far from stopped.
"There are pockets where the market is very strong," he said, mostly in areas with moderately priced homes. "The constant barrage has been about foreclosures and prices plummeting, but you're still going to see increases."
The portions of Maryland set to receive new assessment notices this week were last reassessed in 2005, at the peak of the housing market, according to state officials. So that means many homeowners may, in fact, see declines in assessed values.
But under the Homestead Tax Credit program, only a small percentage of a home's increased value may be taxed each year, if the home is the primary residence of the homeowner. The state limits increases to 10 percent a year, though most local governments have more restrictive caps. More than 1.4 million Maryland homeowners have paid $1 billion less in property taxes under the program.
With the reassessment notices set to be mailed out to 700,000 homeowners, state officials also are bracing themselves for the second year in which residents are required to apply for the tax credit - either electronically or in the mail. In the past, the credit was automatically extended to properties, but state officials feared too many ineligible property owners were taking advantage of it. Applications and information will be included with each assessment notice, and the automatic protection won't end until 2013.
Last year, Sullivan said, his agency was snowed under with the huge number of applications.
"It was like Santa's workshop - bags after bags of mail" that took months to process, he said. Sullivan is concerned that this year could be as bad.
Those receiving the credit need only apply once, not each year, but residents are still getting used to the change, which began last December. Those buying a home have 180 days to apply.
The law changed to eliminate ineligible homeowners by collecting enough personal information to cross-check motor vehicle, Social Security and federal tax records to see which homes are owner-occupied. A letter from Sullivan is set to be included in this year's notices to explain the tax credit program and exactly how the homeowner should respond.
In response to last year's notices, the state received applications for the Homestead Tax Credit from 91 percent of homeowners already receiving the credit, said Robert E. Young, assistant director of the Department of Assessments and Taxation. More than half a million phone calls also were made to the agency with questions about the program.
Anita Miller, the state's Homestead Tax Credit administrator, said having a person's Social Security number makes it easy for her staff to quickly check his status.
For example, in one case she quickly determined one homeowner had died in 2003, yet someone had signed the person's name to the tax credit application. Another couple from Montgomery County applied for the credit in October, and then applied again, for a different property, in February. They had apparently bought a new home but didn't notify the state that they sold the old one. When a home changes hands, the cap comes off for one year.
Young said if someone is getting the tax credit on more than one property, Miller tries to determine which of the homes is owner-occupied. If that can't be established, all of the homes would lose the credit.
baltimore-area assessment caps by percentage
Anne Arundel - 2%
Baltimore City - 4%
Baltimore County - 4%
Carroll - 7%
Frederick - 5%
Harford - 9%
Howard - 5%