The Homestead Tax Credit law was amended by the 2005 General Assembly for property owners who completed settlement on residences between January 1 and June 30, but the deed was not recorded until after July 1. This class of owners may elect to have the settlement date considered as the transfer date for Homestead Credit Eligibility purposes (TP § 9-105(d)(5)(i)(2009 Supp.)). For example:

John Doe completes settlement June 1, 2006 on a property that will be used as his principal residence. The deed is not recorded in land records until July 10, 2006. SDAT processes the transfer and assigns a transfer date of July 10, 2006. Under these circumstances, this property is not eligible to receive a Homestead Credit until the tax year beginning July 1, 2008. Under this new legislation, he may complete the Attachment A, provide a copy of the executed deed and settlement sheet, and submit them to SDAT before September 1st following the settlement date. This would make the property eligible for the Credit on the tax year beginning July 1, 2007, one year earlier.

To process the changes described above, the Homestead Credit status code that disqualifies a property due to transfer must be removed.

Possibility of Homestead Credit Tax Recapture

Note that if a property owner elects to apply for this credit eligibility, and the seller was receiving a Homestead Credit in the tax year the deed was recorded, then the new owner is responsible for paying the recapture of that Credit. Continuing with the example from above:

When the deed was presented for recordation on July 10, 2006, the property was still in the seller’s name. The tax bill issued for the 2006/07 tax year was also in the seller’s name and it’s possible that the seller had a Homestead Credit. John Doe would have had to pay this bill before transfer could occur. He would receive the benefit of the seller’s Credit for the 2006/07 tax year. John Doe then applies to SDAT requesting that we recognize the settlement date and is thus eligible to receive the Credit for the 2007/08 tax year. This application makes the property ineligible for a Homestead Credit in the 2006/07 tax year. An increase change report must be completed to remove the credit.

A homeowner may apply for early Homestead Credit eligibility without realizing a recapture may occur. In the event of a recapture occurring, Supervisors may want to inform the purchaser of the recapture and amount to make certain he or she wishes to continue before the application is processed.

Attachment: A