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Washington County property tax bills rise despite falling home prices

July 12, 2008|By JOSHUA BOWMAN

WASHINGTON COUNTY -- More than 56,000 Washington County residents received their property tax bills in the mail last week.

On average, tax assessment values have risen 13.4 percent this year.

Meanwhile, median home prices in Washington County have plummeted, down 16 percent from this time last year, according to data from the Maryland Association of Realtors.

So how can property tax bills go up as house prices go down?

In short, because homes still are worth more than they were the last time they were assessed.

Property tax bills are based on a state assessment of a property's value. The state assesses properties in three-year cycles, so each property is assessed once every three years.

The assessments -- together with tax rates set by state and local governments -- determine how much property tax is owed each year.

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Because property assessments are done every three years, increases in assessed value are phased in equally over a three-year period.

For example, if a property was assessed in 2004 at $200,000 and then assessed in 2007 at $260,000, the assessed property value would increase $20,000 every year from 2007 through 2009, regardless of what the housing market did over that same period.

"Phase-ins are why assessments are increasing," said Jerry L. Elmore, acting supervisor of assessments in Washington County.

Home prices in Washington County -- and across the country -- soared between 2004 and 2006.

In 2004, the median home price here was $176,000, according to data from the Maryland Association of Realtors. By 2006, that number had surpassed $230,000.

In 2007, when the housing market began to slow down and foreclosures increased, prices fell slightly, to $220,000.

So far in 2008, the median home price here has dropped to $206,650 -- almost $25,000 lower than it was in 2006, but still more than $30,000 higher than it was in 2004.

In order for property tax bills to decrease, one of three things must occur -- tax rates must be lowered, assessed values must fall below a property's last assessment or a combination of the two must happen.

In the meantime, there are ways taxpayers can cut their tax bills now.

The Homestead Tax Credit caps yearly assessment increases on primary residences to 5 percent per year.

Until last year, the credit automatically was applied to tax bills. Now, owners of newly assessed properties must fill out a form to continue receiving the credit. The form is included in new assessment notices.

In addition, the Homeowners Tax Credit can save some residents hundreds of dollars per year in property taxes. The credit is based on a formula that compares a homeowner's income to his or her total tax bill.

For a household in which the combined income is $20,000, tax bills would be limited to $780, Washington County Treasurer Todd L. Hershey said.

"It's pretty substantial," Hershey said. "A lot of people are eligible and may not be aware of it."

Taxpayers with a combined household income of more than $60,000 are not eligible for the credit, Elmore said.

Because it is based on income, taxpayers must apply every year to receive the credit.

In 2007, only 2,087 homeowners in Washington County applied for the credit. Of those, only 1,688 received a tax benefit.

The average savings for those who did get the credit, however, was $907.27, Hershey said.

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