Maryland Homestead Tax Credit: What It Is and How to Apply

When your neighbor's house gets reassessed for 40% more than it was worth three years ago, Maryland law says your property tax bill cannot jump by the same percentage. That protection is the Homestead Tax Credit — and most first-time buyers in Maryland don't know they need to apply for it. It doesn't happen automatically.

What the Homestead Tax Credit Does

Maryland reassesses residential properties every three years. In a hot market, that can mean a massive spike in assessed value, which translates directly to a spike in your annual property tax bill.

The Homestead Tax Credit caps how much the taxable assessment of your principal residence can increase from one year to the next. The state caps the annual increase at 10%. Many counties set it even lower:

• Baltimore City: 4%
• Prince George's County: 0% (assessments are frozen for owner-occupied properties carrying this exemption — one of the most aggressive caps in the state)
• Montgomery County: 10% (state cap)
• Anne Arundel County: 10%
• Howard County: 5%

The credit doesn't reduce your property tax in year one. It prevents the tax from growing out of control in subsequent years as the real estate market appreciates. In neighborhoods seeing 15–20% appreciation annually — parts of Prince George's County, Hyattsville, and the close-in Baltimore suburbs — this cap can represent thousands of dollars in tax savings over a five-year period.

Who Qualifies

To receive the Homestead Tax Credit, the property must be:

• Your principal residence — the home where you live for at least 6 months per year
• A single-family dwelling, townhome, condominium, or cooperative unit

Investment properties, second homes, and rental properties are explicitly excluded. You can only receive the credit for one property at a time. If you move and your old home is no longer your principal residence, the credit terminates on that property.

Non-citizens can receive the credit, provided the property is their primary residence in Maryland.

The Application Is Required — It Is Not Automatic

This catches a lot of first-time buyers off guard. The Homestead Tax Credit is not applied just because you own a home and live in it. You must submit a one-time application to the Maryland State Department of Assessments and Taxation (SDAT) to establish your eligibility.

The application asks for:

• Property address and account number
• Social Security Number of the applicant(s)
• Confirmation that the property is your principal residence
• Date you began residing at the property

SDAT cross-checks the application against tax return records to verify principal residence status. It is a one-time filing — once approved, you do not need to reapply every year.

Important timing point: You must apply within the first year of ownership to receive the credit before your first reassessment cycle. If you wait and your property gets reassessed at a sharply higher value before you apply, you cannot retroactively recapture the protection for that year.

How to Apply

Applications are submitted through the SDAT website at sdat.dat.maryland.gov. The online portal allows homeowners to apply directly using the property address. You'll need your property account number, which appears on your tax bill.

Alternatively, you can submit a paper application to the local SDAT office in your county. For Baltimore City properties, that's the Baltimore City SDAT office. For county properties, each county has a dedicated assessment office.

Applications received by December 31 of the calendar year in which you purchased the property will generally be processed before the first reassessment notification is issued.

What Happens if You Don't Apply

If you skip the application, your property tax bill will reflect the full assessed value every year with no cap. In a market with active appreciation — which describes most of the Baltimore metro and D.C. suburbs — this can result in your annual tax bill increasing by several hundred to several thousand dollars per year beyond what the cap would have allowed.

Given that the application is free and takes about five minutes online, there's no reason to delay. Put it on your post-closing checklist along with changing the locks and setting up utilities.

Difference Between the Homestead Credit and Other Maryland Property Tax Exemptions

These are separate programs and are often confused:

Homestead Tax Credit — Caps annual assessment increases for your primary residence. Anyone who owns and occupies their home qualifies. This is the one described above.

Homeowners' Property Tax Credit — A means-tested credit that reduces total property taxes for lower-income homeowners. Income thresholds apply. Administered separately by SDAT.

Elderly Individuals Property Tax Credit — For homeowners 65+ whose income falls below certain thresholds. County-specific.

Veterans' Property Tax Exemption — For disabled veterans. Reduces the assessed value of the property, not just the rate of increase.

As a first-time buyer, the Homestead Tax Credit is the most universally applicable of these programs. The others may also apply depending on your income, age, or military service history.

One More Thing: Verifying the Seller's Credit Status

When you purchase a home, the seller's Homestead Tax Credit does not automatically transfer to you. Their protection terminates when they sell. Yours begins when you apply and are approved.

Here's why this matters at closing: If the previous owner had the credit and their assessment was frozen at, say, 2019 values, the property tax bill shown in the listing or in your pre-purchase calculations might not reflect what you'll actually owe once the credit period resets. The first full reassessment cycle after your purchase could reflect the full current market value — potentially a significant jump from what the prior owner was paying.

Ask your settlement attorney or title company to confirm the property's current assessed value in SDAT, not just the current tax bill amount, before you complete your closing cost calculations.

The Maryland First-Time Home Buyer Guide walks through this and other post-closing tax steps specific to Maryland — including how transfer tax exemptions work, how closing costs differ by county, and how to layer state and local assistance programs.

Get the complete Maryland homebuying guide

See more Maryland guides →