[Chat] prop tax

jberlin jdydee at verizon.net
Tue Jul 12 13:17:20 EDT 2011


  thanks for the help. my head is spinning. Can't understand any of 
it.   judy

On 07/09/2011 03:31 PM, Jonathan Wetmiller wrote:
> This blog post explains the situation pretty well:
>
> http://weblogs.baltimoresun.com/business/realestate/blog/2011/07/propertytax_bill_rising_heres_one_reason_why.html
>
> As it explains, if you look at your tax bill, start with the line that 
> says City Tax and subtract the city assessment credit value from that 
> amount. Multiply the result by 100, and then divide it by 2.268.  
> That's the amount you're actually paying taxes on.  I'd be willing to 
> bet that it's less than $116,000 in your case if you've lived in your 
> house for a whi
>
> Property values went up by such a large degree during the credit 
> bubble that it's going to take a long time for taxes to catch up, even 
> with the recently lower assessments, since the tax can only rise by 4% 
> per year with the homestead tax credit.
>
> Personally, I wouldn't mind seeing the credit done away with in favor 
> of a much lower property tax rate for everyone.
>
> Jon
> ------------------------------------------------------------------------
> *From:* jberlin <jdydee at verizon.net>
> *To:* The Charles Village Chat List <chat at charlesvillage.info>
> *Sent:* Saturday, July 9, 2011 1:31 PM
> *Subject:* Re: [Chat] prop tax
>
> i appreciate everyone's response. However I still don't get it. It 
> sounds as if I am still paying the tax for last years assessment and 
> then some. 3 years ago my assessment was 116k. It went up to 133k. Now 
> it is back down to 116k. Yet I'm paying more than the previous yrs.
>
> On 07/08/2011 05:52 PM, Stephen J Gewirtz wrote:
> > Joshua is right about how the  taxes work.  Under the homestead tax 
> law, if your home is owned by you and is your principal residence, 
> your effective assessment (what you actually pay taxes on) can go up 
> by no more than 10% per year compounded.  The 10% figure is used for 
> state tax purposes (if you look at your bill, you will see that it 
> shows both a City tax and a State tax).  And the counties and 
> Baltimore City are allowed to use the 10% figure or to adopt a lower 
> figure -- Baltimore City uses a 4% figure -- for local tax purposes.
> >
> > If you look at your tax bill, it shows a State tax rate of 0.112% 
> and a City tax rate of 2.268% of the assessed value of your house, and 
> it gives the State and City taxes based on your assessment and based 
> on those rates, as well as a total tax.  Those two numbers will be a 
> lot less than they were last year because of the lower assessments.  
> Those numbers reflect what you would pay if there were no homestead 
> tax credit.
> >
> > The next two lines on the bill are a State assessment credit and a 
> City assessment credit.  Those lines represent how much you are saving 
> because of the homestead tax credit.  And the line after that is the 
> net tax amount, which is how much you have to pay if you pay in August 
> or September (you get your tax reduced by one half percent if you pay 
> in July).
> >
> > Let me take my own house as an example.  Six years ago, my house was 
> assessed a little bit more than $83K.  Three years ago, it was 
> assessed for a little bit more than $255K, i.e. it a little bit more 
> than tripled.  This year, it was assessed for a little bit more than 
> $178K.
> >
> > So, six years ago, five years ago, and 4 years ago, I paid a tax on 
> $83K of assessment (actually, I paid less than that. because the $83K 
> was an increase over the previous assessment, and that increase was 
> phased in over 3 years).  Then, three years ago, I paid an actual 
> State tax based on an assessment of $83K * 1.10 and a City tax based 
> on an assessment of $83K * 1.04.  And I paid an actual tax that went 
> up similarly each of the following two years.  So last year, my actual 
> State tax was based on an assessment of $83K * 1.10^3 =. $83K * 1.331, 
> and my actual City tax was based on an assessment of $83K * 1.04^3 = 
> $83K * 1.124864.  These figures were way below the actual assessment 
> of $255K (actually, that $255K was phased in over 3 years, but the 
> phase-in did not affect the actual tax)
> >
> > For this year, my assessment went down to $178K (and an assessment 
> decrease takes effect immediately rather than being phased in over 3 
> years as an increase would be).  But my actual State tax is based on 
> an assessment of $83K * 1.10^4 = $83K * 1.4641 = $121,520, which is 
> much less than the actual assessment of $178K.  And my actual City tax 
> is based on an assessment of $83K * 1.04^4 =. $83K * 1.17 = $97K, 
> which is also much lower lower than the actual assessment of $178K.  
> The difference between a tax based on the actual assessment and the 
> tax based on having the effective assessment go up each year by no 
> more than 10% for State tax purposes and by no more than 4% for City 
> tax purposes is the homestead tax credit shown on the bill as State 
> assessment credit and as City assessment credit respectively.
> >
> > A useful figure is how long it will take your tax to double.  Your 
> tax can double in x years, where x is the solution to the equation 
> 1.10 ^ x = 2.  In other words, your State tax will double in 7.27 
> years (i.e. will almost double in 7 years, and will a bit more than 
> double in 8 years).  Your City  tax can double in y years, where y is 
> the solution to the equation 1.04^y = 2.  In other words, your City 
> tax can double in 17.67 years (i.e. will almost double in 17 years, 
> and will a bit more than double in 18 years).  One way to approximate 
> this doubling time is to divide the annual percentage increase into 
> 72. So, for example, State tax can double in approximately 72 / 10 = 
> 7.2 years, and City tax can double in approximately 72 / 4 = 18 years.
> >
> > And yes, Joshua is right about how the system can be viewed as 
> unfair to someone who has just bought a house.  If mine had sold three 
> years ago for its assessed value of $255K, the new owner would have 
> paid a tax based on an assessment of $255K, i.e. would have paid 
> roughly triple what I paid.  And this year, he would have gotten a 
> sizable decrease to a tax based on an assessment 0f $178K, but still 
> would be paying a lot more than I am paying.
> >
> > Your assessment is what the assessor estimates that your house will 
> sell for.  So without a homestead tax credit, you basically are taxed 
> on what the State estimates that someone will be willing to pay for 
> your house.  What the homestead tax credit does is to give some 
> protection to long term homeowners so that, for example, when the 
> assessed value of my house tripled three years ago, my tax did not 
> triple over 3 years (since the increase is phased in linearly over 3 
> years).  It enables long term homeowners to keep their houses when 
> their houses become far more desirable to people seeking homes.
> >
> > Steve
> >
> > On 7/8/2011 2:48 PM, Joshua Fruhlinger wrote:
> >> OK, so I just looked at my own email and realized that was way too 
> complicated an explanation.  Here's a simpler one:
> >>
> >> Your property tax bill is EITHER 2.268 percent of the assessed 
> value OR 3 percent more than you paid the previous year, whichever is 
> LOWER.  If you've lived in your house since before the property 
> bubble, your assessment probably went up very fast in the mid '00s and 
> then came down a somewhat (but not back to the original level) in the 
> late '00s/early '10s.  So for many people, even if the assessment has 
> gone done, a 3 percent INCREASE over your previous year's bill is 
> still going to be LESS than 2.268 percent of that reduced assessment. 
> Basically, the taxes you've been paying still haven't caught up to 
> your assessment, and will keep increasing 3 percent a year until they do.
> >>
> >> (Note that I'm not sure if 3 percent is the exact value, but it's 
> something close to that if not.  And this only applies if you live in 
> the property we're talking about -- that's why it's called the 
> "homestead tax credit" -- and if you were living in it the previous 
> year.  The first year you own the house, youpay 2.268 percent of the 
> assessed value, and that's your baseline going forward.)
> >>
> >> jf
> >>
> >> On Jul 8, 2011, at 2:13 PM, Joshua Fruhlinger wrote:
> >>
> >>> If you're getting a homestead tax credit, your tax can only go up 
> a little bit every year (I think 3 percent) as long as you stay in 
> your home.  But it will go up that amount until it hits the amount 
> you'd pay without the credit.  After the housing bubble in the 
> mid-'00s a lot of property's assessed values went up so fast that 
> people with the tax credit never caught up.
> >>>
> >>> For instance:
> >>>
> >>> Say in 2006 the assessment of your house doubled from 100K to 
> 200K.  Your theoretical tax would go from $2,268 to $4,356. But 
> because of the homestead tax credit, your actual tax can't go up more 
> than 3 percent a year.  So in 2006 you'd owe $2,336, in '08 $2,406, 
> and in '09 $2,478.
> >>>
> >>> Then in 2009 they reassess your value down, from 200K to 150K.  
> Now your theoretical tax drops from $4,356 to $3,402.  But because of 
> the homestead tax, you aren't paying anywhere near even that reduced 
> amount.  So the tax you actually pay in practice in 2010 is still a 
> three precent increase -- $2,552. Your actual tax bill would only go 
> down if your house lost a lot more value -- if it were assessed at 
> less than $112,500 or so, with these numbers.
> >>>
> >>> jf
> >>>
> >>>
> >>> On Jul 8, 2011, at 1:59 PM, jberlin wrote:
> >>>
> >>>> Have many people received property tax bills higher than last 
> year even with the lower property assessment?
> >>>>
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