Looking for a new home in the Baltimore area or trying to sell your home so you can move to a new location? Activities at either end of the real estate sales spectrum can cause stress for anyone. There are so many details to think about and so much information to learn and understand. It is easy to feel overwhelmed by it all. You need a trusted resource to help you stay on top of things. Movoto, Inc. is here to help with the information and the support you need. Today, we want to talk about Baltimore City’s residential property taxes.
How Are Baltimore Property Taxes Determined?
For those of you unfamiliar with Maryland’s property tax procedures, let’s start with the basics. Every three years, the Maryland Department of Assessments and Taxation determines the property assessment values for residential property in Maryland. This department also enforces the state’s property tax laws.
Maryland’s 23 counties, 155 incorporated cities, and the city of Baltimore issue property tax bills twice a year in July and August. The Maryland Department of Assessments and Taxation determines the amount of property tax homeowners pay based on the estimated fair market value of their property and the Department’s corresponding tax assessments. Most people pay their residential property tax through their mortgage lender’s escrow account. Counties and cities depend on the property tax to determine their budgets (along with an allotted portion of the state’s income tax).
For purposes of determining the amount of property tax that homeowners will pay for any three-year period, the state of Maryland assesses the estimated fair market value of residential property once every three years. In 2015, the average increase in residential property assessments statewide was 9.5%. The increase in 2015 residential property assessments for Baltimore City was half of the state’s increase (4.9%).
There is a cap on the increase of property tax, called the Homestead cap, that currently shields homeowners from paying any property tax on the market value increase above the municipality’s cap (Baltimore City’s cap is 4% per year). In Baltimore city’s case, that is a savings on the .9% above 4%.
Where Did Baltimore’s Property Value Increase?
The downtown Baltimore City area is home to the Orioles Stadium, the National Harbor, including the National Aquarium, Port Discovery, the Maryland Science Center and various tourist spots that provide entertainment, restaurants and shopping areas. The Charles Street corridor in Baltimore is considered the dividing line between East and West Baltimore. Charles Street is a major north-south transportation route through the city and currently an area where people want to buy homes. Homes in the downtown Baltimore area and Charles Street corridor saw growth in their property fair market values in the teens; however, for almost half of Baltimore City residents (49%), land values fell this time around.
How Do Baltimore Tax Rates Compare to Other Municipalities?
According to the tax rate tables for the state of Maryland, the tax rate for Baltimore city is $2.13 per $100 of assessment. That is the highest property tax rate in the state. Such a high property tax rate functions as a disincentive for investment in Baltimore, especially in minority and low-income areas. The next highest rate is half of Baltimore City’s rate. Baltimore County has a property tax rate of $1.1. In comparison, Washington, D.C., has one of the lowest residential property rates in the nation with an effective rate of $.57 per $100 of assessment while New York City’s residential property tax is 6% of the assessed fair market value.
A silver lining appears on the horizon, however, because there are several plans to reduce Baltimore City’s property tax rate. The Mayor of Baltimore, Stephanie Rawlings-Blake, wants to lower city tax rates by 20 cents by the year 2020. She put forward a ten year plan to reduce the rate starting in 2013.
Councilman Nick Mosby’s plan would reduce the property tax rate assessed against owner-occupied homes to $1.80 per $100 in assessed value. The current effective rate is $2.13. He would reduce the rate to $2.10 for non-owner-occupied residences where the current rate is $2.248.
Councilman Mosby’s plan also includes the addition of a solid waste management fee. More than half of Mr. Mosby’s proposal to reduce taxes rests upon a new solid waste management fee. The proposed change to a separate waste management fee is unpopular with residents. Opponents to Mosby’s plan say that, depending on the feature’s design, such a separate waste management fee would potentially save wealthy landowners a lot of money but would not significantly help low-income landowners. Mosby and other proponents of the solid waste management fee point to Howard County as an example of such a fee being separate from the property tax. They argue that it would create a more compatible comparison between the areas. However, Baltimore County is the closest geographic area that competes for residents with Baltimore City and the County does not have a separate waste management fee. It is interesting to note that Mayor Rawlings-Blake did not enact the waste management fee as part of her plan to reduce taxes.
Mosby also would impose a higher rate for vacant properties than occupied properties. This change would result in increased tax revenue which Mosby then plans to apply to reduce tax rates. He also believes that he can find enough inefficiencies in the city government whose elimination would pay for tax cuts.
One more plan is in the works from Councilman Carl Stokes. He only released a portion of his plan so far. Mr Stokes has a history of his opposition to the City’s use of tax breaks for large developments. His plan suggests that he can realize 40-50% reduction in taxes over a five-to-eight year period. The savings would come from increasing the city’s revenue base. In recent years, however, the city has seen reductions in state aide for education which means Baltimore residents may have to start making contributions to education which would offset any income earmarked for tax reductions.
If you have any questions on Maryland property taxes, property tax assessments, or anything else to do with Maryland real estate, please feel free to contact us at 888-766-8686.
2 Point Highlight
The increase in 2015 residential property assessments for Baltimore City was half of the state’s increase (4.9%).
The Mayor of Baltimore, Stephanie Rawlings-Blake, wants to lower city tax rates by 20 cents by the year 2020.
