If you’ve owned your Maryland home for a while, your property tax bill is probably lower than the assessment alone would suggest. That’s usually the homestead tax credit at work. When you sell, that credit doesn’t go with the house, and that surprises both sellers and buyers. For the homestead credit in the Hampstead, Manchester or Upperco area, see selling a house fast in Hampstead.
I’m Evan Weissman. I buy houses across Maryland, and the homestead credit comes up in many sale conversations, usually when a buyer asks why their tax estimate is higher than the seller’s bill. Here’s how it works, based on SDAT’s published guidance.
What the credit does
The homestead credit limits how much the taxable assessment on your principal residence can rise from one year to the next. It doesn’t cap your market value or your assessment. It caps the part of the increase you pay tax on. The rule is in Tax-Property section 9-105, and SDAT’s homestead FAQ explains it in plain terms.
The state cap is 10% a year for the state portion of the tax. Each county and many towns set their own cap for local taxes, and many are much lower. On SDAT’s 2026-2027 table, for example, Anne Arundel’s county cap is 2%, Baltimore County’s is 4%, Carroll’s is 5%, and Montgomery’s is 10%.
A simple illustration
Say your taxable assessment last year was $300,000, and SDAT’s phased-in assessment for this year is $330,000. With a 4% county cap, the county tax is figured on $312,000 instead of $330,000. The credit covers the tax on the $18,000 difference.
Keep that up for years in a rising market, and the gap between the full assessment and your taxable amount can get large.
Who qualifies
The credit applies only to the one property that is the owner’s principal residence. Since 2007 legislation, owners have had to file a one-time application to keep receiving it. SDAT’s real property search shows whether a property has an application on file. Rentals and vacation homes don’t qualify, which is the main reason the application requirement exists.
Why the credit stops at the sale
The credit belongs to the owner’s use of the home, not to the house itself. When the house changes hands, the buyer doesn’t inherit your capped assessment. Their taxes are generally based on the full assessment, and any new cap protection builds up from there once they qualify and apply.
According to SDAT, new purchasers are mailed a homestead application after the deed is recorded and the records are updated. Buyers who plan to live in the house should send it back.
What this means at settlement
Property taxes in Maryland are usually prorated at settlement based on the current year’s bill. Your bill, with the credit, is what the title company uses to split the year between you and the buyer. You aren’t charged extra because the credit ends.
What does change is the buyer’s expectations. A buyer who looks only at your bill may underestimate their own taxes, and their lender will estimate escrow on the full assessment. That’s not a reason to lower your price, but it’s good to understand when a buyer or appraiser raises it.
If you move out before you sell
If the house stops being your principal residence, for example because you’ve moved into a new home or rented it out, SDAT asks owners to report it to the local assessment office. A house that sits empty briefly while you sell is a common situation; if you’re unsure how it’s treated, call the assessment office and ask. Renting it long term ends eligibility.
If you’re buying another Maryland home to live in, apply for the homestead credit there too.
The other credit with a similar name
The Homeowners’ Tax Credit is a separate program based on income, and it requires its own application each year. It also ends when you sell. If you’ve been getting it, the property tax relief won’t follow you unless you qualify and apply at your new home.
A short checklist before you list
A few minutes of homework helps here:
- Look up your property on SDAT’s real property search and note the homestead status and the phase-in assessment for the current and coming years.
- Pull your most recent tax bill so you can see the credit amount and the taxable assessment.
- Keep a copy handy for buyers and their agents, who will ask about taxes.
- If a buyer’s lender or appraiser raises the difference, point them to the full assessment rather than your capped figure.
- Once you’ve bought your next home, file the homestead application there so the cap starts working for you again.
None of this changes your sale price. It keeps the tax conversation from stalling a contract.
How this fits with your overall numbers
The homestead credit is one of several tax items in a sale, alongside the transfer and recordation taxes and the proration. My article on SDAT assessment vs. market value explains why the assessment and the sale price rarely match, and my cost of selling article shows how taxes fit with everything else.
Does the Maryland homestead credit transfer to the buyer?
No. The buyer’s taxes are generally based on the full assessment, and they have to apply for the credit themselves.
Do I lose money at settlement because of the homestead credit?
No. Taxes are prorated using the current bill, which already reflects your credit.
How do I know if I have the homestead credit?
Look up your property on SDAT’s real property search, which shows the homestead application status.
Is the homestead credit the same as the Homeowners’ Tax Credit?
No. The Homeowners’ Tax Credit is a separate income-based program with a yearly application.
Talk through your situation
If you’re thinking about selling and want to understand your numbers, call or text me at (410) 498-7473. I’ll walk you through what you’d net.