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Homestead Deductions in DC and MD

If you buy your home in DC or in Maryland, and will live in the property, you will want to apply for the homestead deduction.

The homestead deduction will limit how much your property taxes can increase annually and potentially reduce your tax bill.

In DC, with the homestead deduction your taxable assessed value will be reduced by $89,850.  This drops your monthly property taxes by $63.64.  More information: https://otr.cfo.dc.gov/page/homesteadsenior-citizen-deduction  The homestead deduction will also limit your annual property tax increases by 10%.

DC audits homestead deduction applications and it’ll be necessary to change your address with the DMV to your new home. I recommend doing so shortly after settlement – within the first 30 days.  If DC audits you and you haven’t done so, they could pull your deduction or your reductions in transfer tax.

To apply for the homestead deduction in DC please follow these steps

1. Navigate to https://mytax.dc.gov/
2. Scroll down to click on “Search Real Property by Address or SSL” under the real property header
3. Enter the street address for your home and click the search button at the bottom right of the screen
4. Select your home
5. Click on “Applications and “Actions” (far right of the blue bar)
6. On the far right/top right box, click the button to submit an application for the homestead deduction, and then fill out and submit the required information therein.

In Maryland, the Homestead Tax Credit will also reduce the impact of rising assessments on your tax bill.  Your property tax increases will be limited to 10% or less on an annual basis, provided you live in the property and receive the homestead credit on your tax bill.  The application for this program is here, or apply online here. If you’re applying online for the homestead and you don’t have but need your access number, you can email sdat.homestead@maryland.gov to request it or call them at 866-650-8783.

Certain counties, in addition, will give you a reduction on your property taxes.  Around June of each year, the county council will vote on whether to include a property tax deduction for homeowners who live in their property.  In Montgomery County for example the reduction is $692 a year which is $57.66/mo.

After your homestead deduction is approved it’ll impact future property tax bills.  If your mortgage payment includes an escrow payment for property tax, expect an escrow analysis be done once a year.  The escrow analysis looks back at property tax and insurance costs incurred over the last year.  It’ll recalculate what should be your monthly payment to your escrow based on that.  Escrow analyses and changes to your payments always look at the past, rather than predicting the future.  Getting a homestead deduction approved doesn’t change your monthly payment until down the road when the next escrow analysis is done. Learn more https://alexjaffe.com/what-is-escrow