Maryland Assessment Procedure Manual

Category:	Tax Credits
Category No.:	012
Subject:	Homestead Credit
Subject No.:	150
Topic:	Damaged /Razed Property
Topic No.:	25
Date Issued:	12/27/2004
Revision Date:	12/11/2023
Damaged Property If property receiving a homestead tax credit is uninhabitable due to an accident or a natural disaster, the property may continue to receive a homestead tax credit, at its current level, for the current tax year and the next two tax years. (Tax Property Article 9-105 (c)(2)) The damaged improvements should be removed from the tax rolls. The existing homestead tax credit and owner occupancy code should not be changed. If all the improvements are being removed from the tax rolls, it would be at the office’s discretion to use an improvement value between $0 (zero) and $1000 in the Building Override field within the building tab. If the improvements have not been reconstructed or repaired at the end of the second full tax year following the damage, the property must be changed to non-owner occupied and the homestead credit must be removed. Razed Property This category involves a razed property, or a dwelling vacated for substantial rehabilitation. In this instance, the owner must have owned and occupied the dwelling as their principal residence for at least 3 full previous tax years in order to continue meeting the homestead credit eligibility. The new construction for razed or rehabilitated property must be complete and occupied as the owner’s principal residence after the first full tax year instead of the two-year period allowed for damaged property. (Tax Property Article 9-105 (c)(5)) Example: A property transferred on 11/7/2018 and owner completed their Homestead Credit Application after transfer. Their 1st Full Tax Year would be June 30, 2020. Their 2nd Full Tax Year would be June 30, 2021. Their 3rd Full Tax Year would be June 30, 2022. The owner would remain eligible to maintain their homestead credit eligibility after July 1, 2022. The owner then vacated and razed their dwelling to building a new dwelling on December 1, 2022. Their new dwelling must be completed and occupied by July 1, 2024 to maintain their homestead credit eligibility. Note: In the event the improvements are razed and rebuilt meeting the above conditions, Maryland Annotated Code, Tax Property Article Section 8-104(c)(1)(iii), instructs our Department to revalue the property within any year of a 3-year cycle when a change results from substantially completed improvements adding at least $100,000 of increased value to the property's valuation. Maryland Annotated Code, Tax Property Article Section 8-104(c)(2), instructs the Department to determine the value of the improvements from what would have resulted if the revaluation had occurred in the 1st year of its 3–year assessment cycle; it further instructs the Department to determine the value that would have occurred in the preceding cycle year and adjust the 3 year phased-in value resulting from the revaluation for each of the remaining years of its assessment cycle. In summary, these provisions of the law will cause the Department to make adjustments to the current(new) and prior(base) values including the phased in taxable assessment value. The database will apply the homestead credits in place prior to new construction value. Homestead Credits are not determined on the increase in value prior to the razing or rehabilitation to value of new construction . Processing damage and razed property in the database Users must not change the Owner Occupancy, Credit Status or Homestead Eligibility fields in the database at the time of the damage. These fields must remain the same in order for the credit to calculate correctly. An out of cycle notice must be generated from the database for the first FULL tax year after the damage occurred. The base and current values are to be removed by entering a value of $0 (zero) through $1000 in the building override field. (Depending on internal office policy) Follow all procedures for processing an out of cycle notice and select “Demolition” as the type of change. Users must add Flag Type “DMGD” for damaged and Razed property within the Sites & Flag Tab when Occupancy is “H” or “D”. The date of damage or razing must be entered in the flag value field. This flag is used to track the property. When property fails to meet the requirements of the law, the occupancy must be change to Non-Owner Occupied. In some cases, the existing homestead credit may be greater than the resulting total value after the building is removed. In this case, the homestead credit will be equal to the total phase-in value of the account and the taxable value will be zero. The abatement on the property should be based on the schedule in Tax-Property Article 10-304.

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