Pr. George's Property Tax Cap to be Lower Next Year
Even if a homeowner's property assessment magically soars in Prince George's County amid a severe real estate downturn, the county won't be able to reap the benefits next year because of a complex system of tax laws.
The County Council is poised to pass legislation regarding the Homestead Property Tax Credit, a statewide tax limit designed to protect homeowners from large jumps in their property assessments year-to-year. It works like this: Say you bought a house for $100,000, and in your next assessment, the valuation jumps to $120,000--a difference of 20 percent. Because of the tax credit, localities in Maryland can only tax you on up to 10 percent of that increase in value. In this example, that would mean being taxed on up to $110,000.
Each locality gets to set its own Homestead Property Tax rate every year, ranging between 0 and 10 percent. Here's a list of all the current rates.
In Prince George's, the cap is currently 5 percent, meaning the homeowner in the last example would only pay taxes on $105,000. But the county's charter also states that the tax rate can't exceed 100 percent of the home's initial value ($100,000), plus the percentage increase in the Consumer Price Index for the previous 12 months. Over the last 12 months, the change in the CPI has actually been negative, county officials said, meaning the county's tax cap next year must be set at 0 percent.
The Prince George's Gazette reports this is the first time the county has had a 0 percent cap in 20 years, and that it will mean an average savings of $115 to a homeowner in Prince George's. The county will make out much, much worse. Officials project Prince George's will take in $34.6 million less in property tax revenue in fiscal year 2011 than it would have if the cap remained at 5 percent--yet another financial blow to the already fiscally beleaguered county.
The tax break only applies to homeowners who live in their homes, not those who rent them out. The new county law would take effect July 1, though the measure still needs final approval by the County Council.
If you're still conscious after all that math, and want to be heard on the matter, the Council is expected to hold a public hearing Tuesday.
October 15, 2009; 1:00 PM ET
Categories: Jonathan Mummolo , Prince George's County
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