Homestead Tax Credit Penalty Takes Effect; Application Deadline Fast Approaching

As reported by the Baltimore Sun, new legislation takes effect this week that will authorize the State Department of  Assessments and Taxation to assess a 25% penalty on homeowners who “willfully misrepresent” the facts to become eligible for the homestead property tax credit.   Homeowners would still be required to reimburse the state for the amount of the credit received, plus interest.

The homestead credit, which has been part of Maryland’s property tax law since the late 1970s, is a cap on the amount a home’s taxable value can increase from one year to the next. It is intended to prevent an owner-occupier’s property tax bill from ballooning rapidly.

Until five years ago, the credit would be applied automatically to homes that were identified at the time of purchase as the buyer’s primary residence. But the mechanical nature of home closings led to many people receiving the credit on a second home or an investment property.

To eliminate the “double-dipping” associated with this program, legislation passed five years ago to require homeowners to file an application to receive the credit instead of the credit being automatically applied. The deadline for submitting applications is December 31, 2012 and an application must be on file for a homeowner to continue receiving the credit.

This new law is another attempt to eliminate the double dipping.  Determining “willful misrepresentation” will require a specific act by a property owner such as submitting an application for a property that is not a primary residence or misrepresenting eligibility through another communication with the assessment office.

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