Baltimore city taxes and assessments
Kaaawa, HI · Member since 2016 · 14 posts · 5 votes
Hey Baltimore Investors,
I'm looking at a multifamily in the city, but I'm worried that the taxes will rise significantly when I purchase the building. Does anyone know how assessments work in the city? Will the new assessed value equal the sales price, or is there some other formula that the city uses that will end up with an assessed value significantly lower than the sales price? The difference could be $3,000 a year in expenses.
The city tax assessors use voodoo magic to come up with the numbers. Your assessment may stay low or may jump well above what you paid.
Personnel I feel they are so far off reality that the assessors are criminally negligent in their assessments. I think the city is ripe to have a class action suit against it for tax assessments.
In Maryland, each property owner is levied a property tax by the state and by their county (or city, in the case of Baltimore City). The MD State Department of Assessments and Taxation (MD SDAT) estimates the value of a property, and the county or city is responsible for billing and collecting the taxes.
Property taxes are generally used for things like public safety, sanitation, education, transportation, health services, legislative expenses, social services, recreation, and many other services extended to residents.
The total assessed value of a property is split into two sections: the land value and the property value. Every three years a property is re-assessed by MD SDAT. Baltimore City is divided into three sections, so that 1/3 of the city properties are assessed each year. In December, property owners receive an assessment notice of their assessment year which details the newly assessed value of their land and property. Every property owner has the right to appeal the notice of assessment of his or her property within 45 days of the date of the notice.
MD SDAT uses two methods or approaches to determine the assessed value of a property. To determine the value of the land, property assessors use what they call the Sales Approach. They look at the sales prices of comparable properties to determine what your land is worth. To determine the value of your dwelling, the Cost Approach is used. This method calculates what it would cost to build a similar dwelling, minus any depreciation due to the age and condition of the house. Assessors will also note the sales of similar dwellings to see if they are worth more or less than a newly constructed house.
Properties in Baltimore City are levied a Baltimore City property tax and a Maryland State property tax.
Current (July 1, 2015 to June 30, 2016) tax rates:
*In an effort to reduce the city property tax rate "20 cents by 2020," (a strategy outlined by Mayor Stephanie Rawlings-Blake’s administration in 2012) Baltimore City Council passed legislation approving the "Targeted Homeowners Property Tax Credit." This credit reduces the property taxes for owner-occupants. Each year, the board of estimates approves a new credit amount, which is then applied against the "improved value" of owner-occupied properties. (Property assessments are comprised of two parts: the "land" and the "improved value.") The city budget includes $20,900,000 for the "Targeted Homeowners Tax Credit" in Fiscal Year 2016, which runs from July 1, 2015 to June 30, 2016. In Fiscal Year 2016, the estimated average tax rate for homeowners in owner-occupied properties has been reduced by nearly 14 cents. This tax credit is on track to reduce the effective tax rate 20 cents by 2020.
There are two special Community Benefits Districts within Baltimore City. Properties within the boundaries of these districts are levied an additional tax surcharge which covers the additional safety, sanitation and other services within these districts.
The tax rate for the Midtown Community Benefits District (which includes parts of Bolton Hill, Charles North, Madison Park, and Mount Vernon) is $0.132 per $100 of assessed property value. The tax rate for the Charles Village Community Benefits District is $0.12 per $100 of assessed property value.
Hey Baltimore Investors,
I'm looking at a multifamily in the city, but I'm worried that the taxes will rise significantly when I purchase the building. Does anyone know how assessments work in the city? Will the new assessed value equal the sales price, or is there some other formula that the city uses that will end up with an assessed value significantly lower than the sales price? The difference could be $3,000 a year in expenses.
All municipality attempts to raise taxes all the time - when ever my assessment goes up - I have a person who appeals ever tax assessment increase - she is paid 25% of the savings she gets for me.
You should worry more on getting great deals - you will always have taxes - just take care of it when increases come - collect rent - flip properties and create cash flow. I personally don't worry about the tax assessment - I know everything is negotiable - if it is not I AM OUT OF THERE - get rid of the bad deal fast or don't get in it to start!
The city tax assessors use voodoo magic to come up with the numbers. Your assessment may stay low or may jump well above what you paid.
Personnel I feel they are so far off reality that the assessors are criminally negligent in their assessments. I think the city is ripe to have a class action suit against it for tax assessments.
Thanks, Andrew, for the tutorial on Md property taxes and assessments. I read most of this on the Baltimore City property tax website, but it's good to have another go at it.
I guess my question was less a legal one and more about what current investors--particularly recent investors--have experienced on their new assessment. The property I'm looking at has had the same owner for at least 15 years and his assessment seems low compared to current sales prices in the neighborhood (including the likely sales price of his building.) Given the process you've outlined, should I expect the property tax to suddenly jump $3,000? My real estate agent says to expect more like a $600 increase, but I'm hoping to confirm this with someone who has real experience. The difference, of course, can make a big difference on NOI for a 4-unit building like the one I'm looking at.
Hi Charles. I like the idea of automatically appealing an increase in the assessment. Does the woman who appeals yours do this for other people? If so, I'd love to have her contact info. It's especially germane in Baltimore City, because the property taxes are so high. As you note, that doesn't mean there aren't good deals in the city; it just means the other numbers have to compensate.
Your property taxes will absolutely jump to a number based on the purchase price. Baltimore County taxes are generally $1000 in taxes per hundred thousand in assessment. Baltimore City is generally $2000 per hundred thousand. For example a $500,000 assessment will land you roughly a $10,000 per year tax bill. Assessments can be appealed and the people I hire have successfully had bills reduced. Just don't expect anything dramatic. It is easier to have the assessment lowered when you pay a lower purchase price than the neighborhood average. When you pay more your chance of lowering your tax bill is reduced. I hope that helps.