Estimated Real Property Tax and Other Non-tax Charges

Explanation of Montgomery County Code, Real Property, Section 40-12C. Disclosure of actual property tax amount.

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 this law 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.

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

  1. 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.
  2. 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.
  3. Current fiscal year means the fiscal year ending the next June 30 after the property is advertised for sale.
  4. 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.
  5. 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.
  6. 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".
  7. You can see the phase-in value at the web page of the State Department of Assessments and Taxation,  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.

    1. 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. Value Information
       
        Base Value Value Phase-in Assessments
          As Of
      01/01/2006
      FY2007      		 As Of
      07/01/2007
      FY2008      		 As Of
      07/01/2008
      FY2009
      Land 84,200 224,040    
      Improvements: 213,650 258,520    
      Total: 297,850 482,560 420,990 482,560

      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.

       

      Value Information
        Base Value Value Phase-in Assessments
          As Of
      01/01/2006
      FY2007      		 As Of
      07/01/2007
      FY2008      		 As Of
      07/01/2008
      FY2009
      Land        
      Improvements:        
      Total: 377,830 377,830 377,830 NOT AVAILABLE

       

      • 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: Estimated property tax and non-tax charges in the first full fiscal year of ownership is $X .
      • Definition of Advertisement:
        1. 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:
          1. all printed sales material available on site or at an "open house";
          2. any information about a specific property for sale which is available on the internet or in a webpage; and
          3. any written material which specifies the amount of tax the seller currently pays or recently paid.
        2. 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:
          1. 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;
          2. 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;
          3. a "For Sale" sign posted at or near a property; or
          4. a radio or television advertisement.
      • Finally, do not forget to update the estimate for the property taxes:
        1. Every July 1, because the tax rates and phase-in values will change; AND ALSO
        2. 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 Montgomery County Code, Development Districts, Section 14-17. Disclosure; notices.

      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.