Buy a home in Maryland to live in, and one sheet in your closing package will shape your property tax bill for as long as you own it: the application for the Homestead Tax Credit. The seller’s credit does not come with the house, and yours does not begin until you apply. Below: why a buyer’s tax bill can jump a year after settlement, how the cap differs by county, and what to do with the form we hand you.
Settlement-day taxes are something else: the one-time transfer and recordation taxes paid when the deed is recorded. The homestead credit is never collected at settlement. It shapes the property tax bill you pay every year afterward. Our Maryland closing costs page explains the settlement taxes.
What the homestead credit does
Maryland reassesses every property once every three years. When the value goes up, the increase is phased in over the following three years. The Homestead Tax Credit limits how much of that rise the owner of a principal residence is actually taxed on each year.
For state property tax, the yearly increase in taxable assessment is capped at 10%. Each county and city can set a lower cap for its own tax, and most of the counties around Glen Burnie have. You pay no tax on the part of an increase above the cap.
To qualify, the home must be your principal residence: you must be living there by July 1 of the tax year and for more than six months of the year, and you can hold the credit on only one property. You apply once, and the credit generally stays in place for as long as you own the home and live in it.
Why the seller’s credit stops at the sale
A long-time owner may have been taxed for years on a figure well below SDAT’s full assessment, because the cap held back each year’s increase. Maryland’s homestead law does not grant the credit for a tax year if the home was sold during the tax year before. So the first full tax year you own the home is usually taxed on that year’s full assessment, with no cap. (In Maryland, a property tax year starts on July 1 and ends on June 30.) Once your own application is approved, the cap limits increases from that new starting figure.
An example with made-up round numbers
Say SDAT’s full assessment on a house is $400,000. The seller has owned it for many years and, because of the cap, pays county tax as if it were assessed at $330,000. You settle in the autumn.
- This tax year. The bill is already set, with the seller’s credit on it. Most sales contracts split that bill by the days each of you owns the home, so your share is based on the seller’s lower figure.
- Next tax year, starting July 1. The credit is gone, so county tax is charged on the full $400,000 (if the assessment stays the same): $70,000 more than the seller was taxed on. At a county rate of $1.00 per $100, that is $700 more county tax for the year, before the state’s share.
- The years after. With your application approved and a 5% local cap, your taxable figure can rise by no more than 5% a year, however much the assessment grows: in the first year the cap applies, by no more than $20,000 (5% of $400,000). The rest is not taxed.
When you plan your monthly costs, start from SDAT’s full assessment rather than the seller’s current bill or the figure in the listing. Any property can be looked up on SDAT’s Real Property search. If your lender pays your taxes from an escrow account, your monthly payment may go up once the higher bill arrives.
Local caps: where the home sits decides
Caps for FY2027 (July 1, 2026 - June 30, 2027), from SDAT’s table of tax rates and homestead caps:
| Where the home is | Yearly cap on taxable assessment increases |
|---|---|
| Anne Arundel County (county tax) | 2% |
| City of Annapolis (city tax) | 10% |
| Baltimore City | 4% |
| Baltimore County | 4% |
| Howard County | 5% |
| Prince George’s County (county tax) | 3% |
| City of Bowie (city tax) | 5% |
| City of Laurel (city tax) | 10% |
| Calvert County | 10% |
| Queen Anne’s County (county tax) | 5% |
| State property tax, everywhere | 10% |
Three things follow from the table:
- A low cap widens the gap. In Anne Arundel, where the county cap is 2%, a long-time owner’s taxable figure can fall far behind the full assessment. The jump for a buyer can be larger there than in Calvert, where the cap is 10%.
- A city or town can add a second cap. Inside a city with its own property tax, the county cap applies to the county part of the bill and the city’s cap to the city part. Where a town sets no cap of its own, the county’s cap covers the town tax too. Annapolis, Bowie and Laurel each set their own; see our Annapolis, Bowie and Laurel guides.
- Not every charge is capped. A 2014 opinion of the Maryland Attorney General found that the credit does not apply to the taxes of Anne Arundel’s special community benefit districts, or of its shore erosion control and waterway improvement districts. Ask us whether a district charge applies to the home you are buying; our special tax districts guide explains those charges.
The mailing address can mislead you here. Many Brooklyn Park homes carry “Baltimore, MD” addresses but sit in Anne Arundel County. Outside the City of Laurel, a “Laurel, MD” address can be in more than one county. Many “Annapolis” addresses are outside the city and pay no city tax. The SDAT record names the county and any town. Our guide on which Maryland county an address is in covers the common mix-ups.
The application, from contract to settlement
Maryland residential sales contracts must include a notice about the homestead credit, so you will first see it when you sign. After that:
- Contract. Send the signed contract to us so we can open your file. For how a deposit is held until settlement, see our escrow accounts article.
- Title work. We search the county land records for the property and check its tax account for unpaid taxes and charges.
- Loan approval. Federal rules require your lender to give you the Closing Disclosure at least three business days before you sign.
- Settlement. You sign the deed and loan papers, and we hand you a copy of SDAT’s homestead application, as Maryland law requires.
- Recording. We send the deed to be recorded in the county where the home sits: for example, the Clerk of the Circuit Court for Anne Arundel County, Land Records Department in Annapolis or the Clerk of the Circuit Court for Baltimore County, Land Records Indexing and Recording Division in Towson. The state intake sheet sent with the deed asks whether the buyer will live in the home as a principal residence. When it says yes, SDAT mails you a homestead application once the deed is recorded.
- After you move in. File online through Maryland One Stop, or mail or fax the paper form. Then check SDAT’s Real Property search for “Approved” or “Application Received”.
On timing, the law treats May 1 as the date to apply for the tax year starting the next July 1, but there is no reason to wait. If you were eligible but did not apply, SDAT can treat you as qualified for the year before you file, but only that one year, so do not rely on it. If your deed is dated before July 1 but is not recorded until after it, ask us: in that case you can ask SDAT in writing to treat the deed date as the date of the sale.
We send wiring instructions by email. Before you wire any money for settlement, confirm the instructions by calling our office at (410) 768-2300, the number on this website, never a number from an email. Our wire fraud warning explains why, and our buyer’s checklist lists the rest of the steps on your side.
Who pays what at settlement
The homestead credit is not a settlement charge, but several things on your settlement statement are:
- Transfer and recordation taxes. Recordation tax and state and county transfer taxes are presumed to be shared equally between buyer and seller unless the contract says otherwise. For a sale to a first-time Maryland home buyer who will live in the home: the seller pays the whole state transfer tax (no exception), and the seller pays the whole recordation tax and county transfer tax unless the contract expressly says otherwise. Whether you count as a first-time buyer is set out in our first-time buyer guide.
- Living in the home matters more than once. Baltimore City takes part of the price out of its own recordation tax, and on lower-priced homes out of its transfer tax too, when the buyer swears they will live in the home. Baltimore County exempts the first $22,000 of the price from its transfer tax when the home will be the buyer’s principal residence. Our Baltimore City and Baltimore County closing costs guides have the details. Give the same answer about living in the home on every form.
- The property tax adjustment. Under most sales contracts, you repay the seller for the days of the current bill that fall after settlement, or the seller credits you for days left unpaid.
- Income-based help. The Homeowners’ Property Tax Credit is separate from the homestead credit and depends on income. A 2026 law moved its deadline from October 1 to February 14, starting with the 2027-28 tax year (due February 14, 2028). A buyer can apply before settlement: if you think you may qualify, apply as soon as you sign the contract and tell us. Any credit SDAT approves before settlement lowers the tax you pay at settlement.
- Title insurance, settlement fees and recording fees. Our instant quote gives a fuller figure, and what title insurance costs explains how premiums are set. In Maryland an owner’s title policy is optional; if you choose one, its premium is paid once, at settlement. Our page on why title insurance explains what the owner’s policy covers.
Situations that need a closer look
- Inherited homes. During probate, an heir who has moved into the late owner’s home may keep the Homestead Tax Credit and the Homeowners’ Property Tax Credit, or claim them for the first time, for up to three tax years. SDAT asks for an heir’s affidavit before the deed passes to them. Our inherited house guide covers selling one.
- Family deeds and trusts. Adding a spouse, moving a home into a trust or deeding it to a child can raise questions about the credit. Ask us before anyone signs; this is the work of our deeds and family transfers service.
- Rentals and second homes. The credit is for one principal residence only. If SDAT later finds an owner did not qualify, it can bill the tax the credit removed for each of those years, and add a penalty where the owner willfully misstated the facts.
How Maryland First Title helps
Our settlement agents are attorneys, and our Glen Burnie office has handled Maryland closings since 1994. We handle title and settlement across the entire state. We confirm which county and town tax the property, show the tax adjustment on your settlement statement, hand you the homestead application and walk you through it, and send the deed to the right Circuit Court for recording. You can settle at our office at 306 Crain Hwy N, Glen Burnie, or we come to you anywhere in Maryland at no extra cost, and weekend or after-hours times are available by appointment. For buying or selling a home, see our residential settlement service.