HOMEOWNERS PROGRAMS
Our Mission Is To Add Value To Your Restoration And Ensure You
Qualify For The Maryland Homeowners Historic Tax Credit Program
To Qualify
- As an owner-occupant, you must spend at least $5,000.00 in a two year period
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You cannot receive credit for any expenditures exceeding $250,000.00.
In other words, homeowners are only eligible to receive a maximum of $50,000.00 in tax credits during a consecutive twenty-four month
BENEFIT
This program generates a bottom-line state tax refund of 20% of Qualified Rehabilitation Expenditures (QREs) to be used by the Owner’s Company members per their pro-rata share ownership in the company for the calendar year for which you finish the rehabilitation project. Any individual’s excess tax credits will be given to each owner in your personal state income tax refund check.
MAINTAINING YOUR STATUS FOR 5 YEARS
Once a tax credit recipient, you are required to keep the building for which you received a credit in compliance with the Secretary of the Interior's Standards for Rehabilitation for five years. If after receiving a tax credit, you do something to the building that does not adhere to these Standards, you must give back a portion of the tax credits that you received, this is known as recapture
It's An All Or None Program
It is important to consider that this program is an all or none program. What that means is that you can’t just decide to do some renovations on your
property that qualify and receive the credit on those items and not other renovations that would not qualify. All renovations must qualify and meet the Secretary of the
Interior’s Standards for Rehabilitation. If you complete 100 tasks in your renovations and 1 of the completed tasks violates the Standards, you will not receive credit for the other 99 tasks
that met the Standards. This is one reason why we recommend using a consultant to help assist you in completing this process so as to remove the guess work.
To Qualify for the Baltimore City CHAP Historic Property Tax Credit Program
(Baltimore City Historic Property Tax Credit)
This program generates a 10-Year 100% Property Tax Credit on the assessment value of your improvements.
The maximum annual value of the CHAP tax credit is equal to the city tax rate times (the appraisal after the house is completed minus the appraisal prior to the improvements). The actual annual value is limited to the increased assessment value.
To Qualify:
- You must spend 25% of the current assessed value
- Do not increase the footprint of the house by more than 20-30% depending on the current square footage.
Highlights:
- This property tax credit is the most valuable Baltimore City offers and it will make a substantial difference in your mortgage payment
- The CHAP Credit reduces the expense of rental properties and increases their value when dividing annual income by a cap rate.
- The CHAP Credit passes on to your Buyer when flipping a house. This allows more potential buyers to qualify for your house and it helps you to sell the house for more money because the Buyers monthly mortgage payments include Principal, Interest and property taxes. Reducing the Property Taxes allows an equivalent mortgage payment to have a higher principal (sale price) amount.
Example:
The current (pre-rehab) appraisal is $150,000 and if the post rehabilitation appraisal increases to $400,000….
the annual savings will be ($400,000-$150,000) = $250,000 *2.248%= $5,620 PER YEAR. If you use the CHAP program and your neighbor does not use it, you could sell your house for about $90,000 more and your home will have the same mortgage payment as your neighbor’s home, or your Buyer’s mortgage on a $400,000 home would be similar to a mortgage for a $310,000 home without the CHAP credit. The 10-year value of the credit for whoever owns the house is estimated to be $56,200 for your rentals.