What are Baltimore City Tax Assessments?
In Maryland, the Department of Assessments and Taxation must appraise each of the more than 2 million properties once every three years.
These assessments are then converted into property tax bills by applying the property tax rates. An assessment is based on an appraisal of the fair market value of the property. An appraisal is an estimate of value. Baltimore City offers three accepted approaches to market value:
Sales approach
Cost approach
Income approach
The idea is that each method of calculation is designed to indicate the property’s fair market value.
If you haven’t already, you’ll first hear about a reassessment through a notice you receive via mail.
“The enclosed notice informs you that the Maryland Department of Assessmen ts and Taxation has determined a new estimated market value of your property after the latest reassessment.”
The letter will then explain which of the Aforementioned accepted approaches used to calculate market value and offer additional levels of detail.
Can I avoid it?!
Short Answer. Not really.
The property tax is primarily a local government revenue. Counties and cities depend on the property tax and a portion of the income tax to make up their budgets.
While the Department of Assessments and Taxation offers the potential for a homestead tax credit Along with a homeowners tax credit, you must meet the 4 below requirements. And if you are a real estate investor and not actively living in that home as your personal residence then you’re immediately disqualified. The other option to consider is appeal!
What is the Homestead Tax Credit?
With the goal to help homeowners handle assessment increases, state law established the Homestead Property Tax Credit. This Tax Credit limits or caps the increase in taxable assessments cach year to a fixed percentage. That limits taxable assessment increases to 10% or less each year.
What is unfortunate for Rental Real Estate Investors Focus on investing in properties in Baltimore City, Maryland is that the Homes tead Tax Credit applies only to the principal residence of the property owner.
This means if you have rental properties throughout the city, however do not live in any one of them, this homestead tax credit will not suit your needs.
What is the Homeowners' Tax Credit?
The Department of Assessments and Taxation also offers the Homeowners’ Property Tax Credit. This credits against the homeowner’s property tax bill if the property taxes exceed a fixed percentage of the home owners gross income. Similar to the Homesetead Tax Credit, investors won’t be eligible according to these requirements:
You must own or have a legal interest in the property;
The dwelling on which you are seeking the tax credit must be your principal residence where you live at least six months of the year, including July I, unless you are a recent home purchaser or unless you are unable to do so because of your health or need of special care;
Your net worth, not including the value of the property on which you are seeking the credit or any qualified retirement savings or Individual Retirement Accounts, must be less than $200,000; and
Your combined gross household income cannot exceed $60,000.
How Often are my Taxes Reassessed?
Every three years your investment property located in Baltimore City will be Reassesed.
They follow a rotation as you can see in the following map
The above screenshot is an image found on maryland.gov’s website for Baltimore City’s Reassessment Areas.
You’ll notice the legend below the map shows the colors and coordination with the dates in which the assessments will take place. At the very top and red is area one which shows if your property is located in this area then it will be reassessed for January 1, 2022. the same goes with area 2 (Yellow) being reassessed January 1, 2023, along with Area 3 being reassessed January 1, 2024.
More information can be found at their main website About Real Property: https://dat.maryland.gov/realproperty/pages/default.aspx
