The credit only applies to an owner’s principle residence, and it limits the increase in the taxable assessment each year to a fixed percentage. Localities must keep the increase to less than 10 percent, but the actual percentage varies by location throughout the state.
What the credit does not do is limit the market value of a property – it is a credit calculated on any assessment increase above 10 percent. In other words, the credit applies to taxes due on the increase in your assessment.
This example from the Maryland Department of Assessments and Taxation shows how it works:
Assume that your old assessment was $100,000 and that your new phased-in assessment for the 1st year is $120,000. An increase of 10% would result in an assessment of $110,000. The difference between $120,000 and $110,000 is $10,000. The tax credit would apply to the taxes due on the $10,000. If the tax rate was $1.04 per $100 of assessed value, the tax credit would be $104 ($10,000 ÷ 100 x $1.04).
The tax credit is not automatic. Homeowners must complete a one-time application to establish their eligibility for it. You can check the status of your eligibility by looking up your property on the Real Property database.
When do you apply for the credit? If you’ve recently purchased a new home, the Department of Assessments and Taxation will mail you the application once the deed has been recorded and the department’s records updated.
Additionally, several conditions must be met during the previous year for the tax credit to be granted, including no transfer of ownership, no change in zoning requested by the homeowner, no substantial change in the use of the property, and the property was the owner’s principle residence for at least six months of the previous year, unless the owner was unable to do so for health reasons.