Estimated Real Property Tax and Other Non-tax Charges
EXPLANATION OF BILL 24-07, REAL PROPERTY - DISCLOSURE - PROPERTY TAX, ENFORCEMENT
When a person buys a house to be used as the owner-occupied principal residence,
the new owner pays the pro-rata share of the property tax bill in the fiscal year
of purchase that the old owner owed. For example, if the property tax bill were
$4,000 and the date of closing were 3 months before the fiscal year ended, the new
owner would pay $1,000, which is 3/12th of the bill for that year.
However, in many cases, the new owner will owe more, perhaps substantially more,
property taxes in the next fiscal year (the first full
fiscal year of new ownership), than the old owner would have paid. The reason is
that the new owner is not eligible for the homestead property tax credit in the
first full fiscal year of ownership.
The purpose of bill 24-07 is to provide the buyer of an owner-occupied principal
residential property an estimate of the property tax bill (plus
non-tax charges included on the bill) in the first full fiscal year of ownership.
There is no way to calculate the exact amount of the property tax bill for the first
full fiscal year of ownership, because there is no way to know what property tax
rates the State, the County, or the municipality if any will set for that year.
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The estimate for property tax and non-tax charges is based on:
- next fiscal year's phase-in value if known, otherwise the current fiscal year's
phase-in value
- this fiscal year's property tax rates (State, County, and municipal)
- no property tax credits (homestead, homeowners, income tax offset, senior)
- non-tax charges in the next fiscal year the same as in the current fiscal year
Definitions
- Fiscal year (FY) is the 12-month period from July 1 through the following June 30.
For example, FY2009 starts on July 1, 2008 and ends at midnight on June 30, 2009.
- In late May, the Council levies the taxes for
the fiscal year starting the following July 1. The terms "tax year" and "levy year"
mean the same. They both refer to the calendar year in which the Council levies
the taxes for the fiscal year starting the following July 1. For example, tax year/levy
year 2007 refers to fiscal year 2008.
- Current fiscal year means the fiscal year ending the next June 30 after the property
is advertised for sale.
- Next fiscal year means the fiscal year starting the next July 1 after the property
is advertised for sale. Note that the bill requires the calculation to be updated
every July 1, because the amounts will change every July 1.
- Non-tax charges are any other charge on the tax bill, such as the solid waste charge,
water quality protection charge, front foot benefits charge, and the bay restoration
fund fee.
- You can see the current property tax bill, which also may include several non-tax
charges, at the web page of the County Government's Department of Finance:
https://www.montgomerycountymd.gov/finance
Look for a link to "Pay or view your property tax bill on line".
- You can see the phase-in value at the web page of the State Department of Assessments
and Taxation https://www.dat.state.md.us/,
Real Property Data Search.
See examples below. SDAT will not show next year's phase-in value for properties
in the third year of the three year assessment cycle until early January of the
current fiscal year. In this case, you must update the calculation as soon as
SDAT updates its data base in January.
The calculation uses the Total phase-in value (land + improvements), from the right-most
column that has a value under the heading "Phase-in Assessments". You will know
that the current fiscal year is year three of the three year assessment cycle if
the right-most column has the words "NOT AVAIL". In this case, the calculation uses
the total phase-in value in the column to the left, which is the last number in
the row.
- The following table is from the State's data base for a property that has a phase
in value for the next fiscal year (FY09, starting on 07/01/2008), which is $482,560.
This is the value the calculation uses to estimate next year's (FY2009) tax bill.
- The following table is from the State's data base for a property that does
not have a phase in value for the next fiscal year, (FY09, starting
on 07/01/2008), so the calculation uses the phase-in value for the current fiscal
year, FY08, $377,830. As noted above, you must update the calculation as soon
as SDAT updates its data base in January.
- Note that the bill requires the estimate to be updated every July 1, because
the tax rates and phase-in values will change every July 1.
- Describe the total in your written materials as follows:
- Definition of Advertisement:
- Any "written or electronically transmitted material that a seller produces or distributes
in connection with the advertisement for sale of a specific residential real property",
as used in County Code §40-12C, includes:
- all printed sales material available on site or at an "open house";
- any information about a specific property for sale which is available on the internet
or in a webpage; and
- any written material which specifies the amount of tax the seller currently pays
or recently paid.
- Any "written or electronically transmitted material that a seller produces or distributes
in connection with the advertisement for sale of a specific residential real property",
as used in County Code §40-12C, does not include, unless the material specifies
the amount of tax the seller currently pays or recently paid:
- a newspaper or magazine classified "liner" advertisement or a "group display" advertisement
in which the advertisement for a specific house is less than 16 square inches;
- one or more introductory screen listings for a specific property on the internet,
which may contain the asking price, as long as the disclosure required by §40-12C
appears on the internet listing in any later or linked screen which provides further
financial details about the property;
- a "For Sale" sign posted at or near a property; or
- a radio or television advertisement.
- Finally, do not forget to update the estimate for the property taxes:
- Every July 1, because the tax rates and phase-in values will change; AND ALSO
- In early January if you used the phase-in value for the current
fiscal year instead of the phase-in value for the next fiscal year, because SDAT
had not yet specified the phase in value for the next fiscal year. This occurs in
the period July 1 - early January in the third fiscal year of the three year assessment
cycle.
EXPLANATION OF BILL 36-07 DEVELOPMENT DISTRICTS - AMENDMENTS
Some areas in Montgomery County are part of a development tax district which may
require the payment of a special assessment, tax, fee, or charge by the homeowner.
This law was enacted to ensure that potential purchasers are notified that the property
may be subject to these charges and have an estimate of the amount. This law requires
the seller of the property to disclose certain information to buyers in advertisements
and sales contracts.
Advertisements: For advertisements, sales brochures, signs, or other sales
material the seller must specify that the property is or would be located in a development
district and any potential buyer should ask the seller about the additional tax
and other charges for which a property owner may be liable.
Sales Office: Each sales office or model home in a new housing development, located
in development district or proposed development district, must prominently display
at least one sign that contains the information listed above.
Sales Contracts: A notice in a contract of sale which prominently contains
the heading "Notice of Special Tax or Assessment" and substantially conforms to
the following text complies with this disclosure requirement:
Each year the buyer of this property must pay a special assessment or special tax
imposed under Chapter 14 of the Montgomery County Code, in addition to all other
taxes and assessments that are due. As of [insert date of contract], the special
assessment or special tax on this property amounts to or will not exceed [insert
dollar amount] each year. As of [insert date of each scheduled or expected increase],
the assessment or tax is scheduled to increase to [insert dollar amount]. For further
information on this assessment or tax, the buyer can contact the County Department
of Finance at 240 777-8950.
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