The Homestead Tax Credit has been a boon for homeowners, as real estate assessments soared along with housing prices. Under the credit, increases in assessments are limited to 10 percent a year - or less, in those counties that have adopted lower caps, as is the case in most Baltimore-area jurisdictions. Owners with the credit pay taxes on less than the full value of the property.
The credit, which can trim hundreds of dollars off a homeowner's tax bill, was worth $1 billion to state property owners last year.
The credit gets attached to properties when they change hands, as buyers sign an affidavit saying whether they intend to live in the home. Some might knowingly misstate their intentions to get the tax break, officials say. But others likely have strayed unwittingly, they say, by buying a second home and renting the old one out without notifying anyone because they were oblivious to the tax credit.
Claudia Raymond said she's in the latter category. The Indian Head resident acknowledged last week that she and her husband bought two other houses last year, one in St. Mary's County and another in Waldorf in Charles County.
Raymond said the couple moved into each house but found they could not afford it. So they have moved back to the Indian Head home they've owned for several years and are in the process of selling the other two.
All three properties are listed as principal residences on the state assessments database. Raymond said she didn't know about the tax credit, nor did she recall signing anything at settlement indicating their intentions to live in the new houses.
"I don't remember checking off any affidavit," she said. "Normally, I thought the mortgage company takes care of that stuff."
The law passed last year was designed to weed out erroneous credits like these. The state advised homeowners of the need to apply for the credit in more than 700,000 property assessment notices mailed out in December.
However, the notices landed in Marylanders' mailboxes at a particularly anxious time, with the housing market in a swoon and with taxes going up.
"The timing was bad," said C. John Sullivan Jr., director of the state Department of Assessments and Taxation.
The notices, and the resulting news coverage, got people's attention. A state hot line set up to answer questions has been ringing nonstop, Sullivan said, and about 364,000 applications have been filed.
