Selling your larger home and moving into a smaller one is a big decision, especially for those looking to simplify life while managing costs. Many people in Maryland are thinking about downsizing because of rising property taxes and higher home maintenance expenses. But here’s something to know: the Homestead Tax Credit in Maryland can help you save money when you downsize. Let’s take a look at how this works and why it’s important for those considering this move.
The Problem: Rising Property Taxes
Home values in Maryland have been rising. This means property taxes are going up too, which can be a real worry for homeowners. Right now, Maryland’s median property tax bill is $3,880, which is more than the national average of $2,459. Homeowners, especially those planning to downsize, could find this financial strain challenging.
In 2025, properties in “Group 1” will see a reassessment, and 96.9% of these homes are expected to have increased property tax bills by an average of 20.1%. In some counties like Somerset and Allegany, the increases might be as high as 37.7% and 32%, respectively.
The Agitation: What Rising Taxes Mean for Downsizing
Rising taxes might make some people hesitate to downsize. But staying in a larger home just to avoid higher taxes might not be the best choice. Larger homes often come with higher maintenance costs and more space than needed. Sometimes, these homes start feeling like more work than they’re worth.
What’s more, if you decide to downsize, high property value could mean you’re selling your larger home for a good price. But buying a smaller home might mean paying those high taxes again because of new assessments.
The Solution: The Homestead Tax Credit
This is where the Homestead Tax Credit becomes a lifesaver. The Homestead Tax Credit limits how much your property taxes can go up each year. For primary residences, this means property tax increases are capped at 10%.
Here’s why the Homestead Tax Credit is important:
1. Limit Big Tax Increases: Even if the property’s assessed value goes way up, your tax bill won’t skyrocket because of the credit.
2. Save Money: By not paying super high taxes in your new smaller home, you get to keep more money in your pocket for things that matter to you.
3. Keep Stability: Staying within a predictable range of tax bills makes it easier to plan your budget.
To qualify for the Homestead Tax Credit:
– The house must be your primary residence.
– You need to have lived there for at least six months.
– Once you apply for the credit, you don’t have to reapply yearly for the same home.
Different parts of Maryland have different cap percentages. Here are some examples:
– Allegany County: 4%
– Anne Arundel County: 2%
– Baltimore City: 4%
– Calvert County: 10%
– Carroll County: 5%
– Charles County: 7%
Knowing these numbers can help you think about where to buy your smaller home.
Additional Tips for Downsizers
Look Beyond Property Size
Downsizing doesn’t just mean looking for a smaller home.:
– Consider Community Amenities: Look for areas that bring extra value like parks, shopping, or community centers.
– Think About Location Convenience: Proximity to friends, family, or favorite places might be important.
– Home Features: A smaller home might still have modern amenities or updated interiors that make it feel luxurious and comfortable.
Plan for Change
Downsizing is an opportunity to sort out what is really essential:
– Declutter: Keep only what you need and love.
– Plan Ahead: Think about your long-term plans when choosing a new home. Is it friendly and easy to maintain as you continue your journey?
Why Act Now Rather Than Later
Given that property tax rates, including the rate determined by Maryland’s State Department of Assessments and Taxation, are on the incline, now might be a good time to act:
1. Capitalize on Current Home Value: Sell while your home’s value is high.
2. Avoid Bigger Increases: Transition before the next big jump in taxable valuations hits.
3. Start Saving Sooner: Activate those savings from a smaller home and Homestead Tax Credit right away.
Downsizing is not just about getting less—it’s about gaining more of what matters: freedom, savings, and peace of mind. With Maryland’s changing property tax landscape, the Homestead Tax Credit can be a helping hand, making downsizing a smart and savvy choice. If you’ve been thinking about making this move, consider your timing and what’s right for you. With a little planning, you can enjoy the benefits of a smaller home while keeping your financial health in check.
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