At the local level, counties and municipalities share responsibility for delivering public services. Residents in municipalities pay property taxes to both the county and municipal governments, even when municipal governments provide services that counties deliver elsewhere.
Maryland law recognizes that overlap. Property tax set-offs allow counties to account for services municipalities provide, rather than county services, while maintaining local flexibility.
The Department of Legislative Services’ annual report on property tax set-offs for fiscal 2025 highlights how counties continue to use these tools to balance service delivery, fiscal responsibility, and long-standing county-municipal partnerships.
How property tax set-offs work
Counties rely on two primary tools:
- Tax differentials, which apply a lower county property tax rate inside a municipality
- Tax rebates, which provide a direct county payment to a city while keeping the county tax rate uniform
State law requires annual county-municipal discussions in many jurisdictions and grants counties discretion in structuring set-offs based on local service delivery.
Fiscal 2025 snapshot
In fiscal 2025:
- 18 counties provided property tax set-offs to municipalities
- Total set-offs reached $142.7 million, a 6.7% increase from the prior year
- Counties without municipalities included Baltimore City, Baltimore County, and Howard County
- Kent, Wicomico, and Worcester counties chose not to establish set-offs
On a per-capita basis, set-offs averaged $32 per municipal resident statewide, excluding counties with no municipalities. For most municipalities, counties calibrated set-offs to reflect the specific services provided locally, reinforcing that these arrangements remain locally negotiated rather than driven by uniform or mandated formulas.
Counties Match Set-Offs/Rebates to Real Local Services
Counties used different approaches based on local needs:
- Seven counties relied solely on tax rate differentials
- Five counties relied exclusively on tax rebates
- Six counties combined both tools
Prince George’s County and Harford County provided set-offs to all municipalities within their borders, reflecting comprehensive county-municipal service coordination. Frederick County continued its hybrid approach, pairing tax differentials for some municipalities with rebates for others based on negotiated formulas.
What the data shows
The fiscal 2025 report reinforces several consistent themes:
- Counties actively adjust set-offs year to year based on service delivery
- No single model fits every county or municipality
- Set-offs remain a locally driven policy tool rather than a one-size-fits-all mandate
Counties continue to balance taxpayer equity, municipal services, and countywide responsibilities within existing statutory frameworks.
Why this matters
Property tax set-offs illustrate how counties manage shared service delivery without shifting costs or imposing uniform solutions. The fiscal 2025 data shows counties maintaining flexibility while supporting municipal services that residents rely on every day.
As fiscal pressures grow across local governments, these locally designed arrangements remain an essential tool for sustaining effective county-municipal partnerships across Maryland.