Baltimore approved a small homeowner property tax cut. Here’s how it works.

Perhaps you saw Mayor Brandon Scott’s social media video standing alongside several council members touting the news they said every Baltimorean has been waiting for.

Or maybe you’re on a more need-to-know basis with the machinations of Baltimore government.

Either way, you should be aware that Baltimore leaders have reached a deal for some minor property tax relief that you may see appear on your bill as soon as July 1.

Here’s how it works

Baltimore’s property tax rate is currently $2.248 per $100 of assessed value, the highest rate of any jurisdiction in Maryland. City leaders concede that the rate has been a barrier to homeownership and say it has limited growth in the city.

That rate would remain unchanged for now. What would begin to decrease is the city’s effective rate — the rate residents pay after exemptions, credits or other adjustments.

Currently, homeowners receiving the Targeted Homeowners Tax Credit, which is available to all 75,000 owner-occupied homes that are primary residences, pay an effective rate of $2.04. That rate would drop to $2.03 as of July 1 under the plan approved by the city Board of Estimates this week.

It would drop further to $1.99 beginning in the next budget year, based on a pledge from the Scott administration. That reduction would become effective in mid-2027.

Every cent of effective rate reduction comes at a cost of about $2 million to the city, which has a total budget of $4.9 billion. To offset some of the expense, city officials agreed to increase the cap on a different credit, the Homestead Property Tax Credit.

That credit caps year-over-year increases in a homeowner’s tax bill at 4%. So, if a property’s taxable value grew from $100,000 to $120,000 in a year, a 20% increase, a resident would be taxed as though the property had grown by just 4%.

This week, the City Council approved a plan to bump the cap to 5% beginning in fiscal year 2028, giving homeowners eligible for the credit slightly less tax relief.

How much would I pay?

The initial one-cent reduction in the effective rate would bring very modest relief to taxpayers. The owner of a $200,000 home could expect to pay about $20 less next year.

In the second year of the plan, the effective rate of $1.99 would reduce bills more substantially. However, the higher cap on the Homestead Property Tax Credit would also kick in, negating some of the impact, depending on how quickly a home’s tax value is growing when Maryland reassesses properties every three years.

A $200,000 home that has its tax value increase by 10% at reassessment (a little over 3% annually for three years) would see $106 in savings in the second year compared to the current rate structure.

A $200,000 home that experiences more rapid growth of 25% triennially (about 8% for three years) would see about $70 in savings.

Over the last decade, homes in Baltimore have averaged 12% growth between reassessments — or 4% annually.

Taxpayers can estimate their cumulative savings with a calculator posted online by the administration.

How did we end up here?

The deal reached by the administration and the City Council is a scaled-back version of Scott’s original plan. In February, the administration initially proposed dropping the effective tax rate to $1.99 beginning in July. At the same time, officials proposed increasing the Homestead Property Tax Credit cap to 6%, cutting further into any relief that taxpayers would see.

Baltimore’s Homestead Property Tax Credit has been capped at 4% since the 1990s.

Councilman Isaac “Yitzy” Schleifer led opposition to the homestead cap change, which required approval by the City Council. Schleifer argued that some residents could face tax increases within several years if the cap was raised.

“This is a tax increase,” Schleifer said at a hearing on the bill last week.

“I do think that it’s troubling that whereas a few new residents might receive a few penny reduction, that we’re going to be doing that on the back of some people who have been here longer,” Schleifer said.

Bob Cenname, the city’s deputy finance director, said the “vast majority” of city homeowners would be “better in the long run.” Only homeowners who repeatedly experience extraordinary growth, exceeding the homestead cap for three consecutive assessment cycles — a rare circumstance in Baltimore — could experience modest tax increases within several years, he said.

Over the last decade, 500 of the city’s eligible 75,000 households experienced nine consecutive years of rapid growth in value, according to the administration.

Scott’s 10-year plan calls for the continued reduction of the city’s effective tax rate, which would fall to $1.81 by 2030. However, Scott’s current term in office expires before then, in 2028.

On Monday, Schleifer proposed an amendment that would have terminated the increase to the homestead cap after two years, forcing the council and future mayors to come back to the table. Schleifer argued that the measure would hold future mayors accountable, but the amendment was rejected.