Takoma Park Real Property Tax
In Maryland, municipalities have the authority to define specific categories for property tax rates. Takoma Park currently has three categories: Real Property, Personal Property, Railroads and Public Utilities. The Real Property Tax rate is assessed to all real property that is not owned by railroads or public utilities. Each of these categories are currently taxed at the same rate based on the assessed value of the individual property.
The City Council is considering establishing a different tax rate for commercial property that would go into effect on July, 2019. If approved, the new Commercial Real Property Tax rate would presumably be set at a higher level than Residential Real Property.
Why is the City considering increasing the real property tax rate on commercial property?
In April 2018, the City Council voted to eliminate the Personal Property Tax on Inventory (“Inventory Tax”) paid by businesses operating in Takoma Park, effective July 1, 2019. The Inventory Tax brought approximately $320,000 in revenue to the City, however the tax was confusing, unevenly applied, and unenforced, resulting in inequities. The Council is now considering ways to cover the lost revenue, and one possibility is through a higher commercial real property tax rate.
Don’t commercial property owners already pay real property tax?
Yes, currently all real property in Takoma Park is taxed at the same rate. Most of the land in the city is residential, generally single family homes. The proposal is to consider changing the commercial real property tax rate to bring in an additional $320,000 to offset the loss of the inventory tax revenue.
How would the change impact my business?
The impact of the new commercial property tax rate on individual businesses would vary depending on several factors.
- If the business paid an inventory tax, the business will see savings due to the elimination of that tax.
- If the business has a lease that includes the payment of all or a portion of real property tax, then the business will see an increase in the real property tax payment under the new proposal.
- If the business lease doesn’t include real property taxes, then the business may not see a change immediately, however when the lease is renewed, the terms may change to add that tax to the business owner’s responsibilities.
- If the business is operating without a current lease, then the impact of the change in real property taxes is harder to predict. The business owner may want to request a new lease soon. Having a current lease is considered good business practice.
To see how the change is expected to impact businesses of different types and sizes, check the chart that the City Manager presented to Council on September 19, 2018.
When would the proposed tax go into effect?
The City Council is tentatively scheduled to consider an increase in the commercial real property tax at their meeting on December 5, 2018 for a possible January 2019 decision. If passed, the new commercial real property tax would go into effect July 1, 2019.
- City Council Agenda Materials (December 5, 2018)
- City Council Work Session (December 5, 2018)
- City Manager’s Slide Presentation (December 5, 2018)
- City Council Agenda Materials (September 19, 2018)
- Commercial Real Property Tax Presentation (September 19, 2018)
- Examples of Impact of Proposed Tax (September 19, 2018)
How do you think commercial properties should be defined by the City Council? Should the proposed commercial property tax rate be applied to all commercial properties, regardless of their size or assessed value? Are there other options the City Council should consider to make up the revenue lost with the elimination of the inventory tax? We are interested in hearing your ideas. Your feedback is welcome.
How are real property taxes determined?
The State Department of Assessment and Taxation released the real property tax assessments effective January 1, 2019. The maps below show the assessed value on real properties. These assessed values do not reflect phased-in assessments, tax credits or tax-exempt status which may be applied to the tax due on a property.
An interactive map displaying this data is located here.
Property taxes are determined by two factors: (1) the total assessment value of the property (land and improvements) and (2) the property tax rate that is established by each taxing jurisdiction. In Takoma Park, taxing jurisdictions include the State of Maryland, Montgomery County and the City.
Assessments are based on the fair market value of the property and are issued by the Department of Assessments and Taxation, an agency of state government. Properties are reassessed once every three years and property owners are notified of any change in the assessed value of their property in late December. Properties in Takoma Park are scheduled to be reassessed in 2018.
Property tax rates are set by each taxing jurisdiction and may vary widely. No restrictions or limitations on property taxes are imposed by the State of Maryland, which gives cities like Takoma Park and Montgomery County the discretion to set tax rates at the level they require to fund governmental services. Property tax rates are expressed as a dollar amount per $100 of assessment.
How is my property tax bill calculated?
Individual property tax bills are calculated using the following formula.
ASSESSMENT VALUE divided by 100 and multiplied by the PROPERTY TAX RATE
FOR EXAMPLE: For a property in Takoma Park with a fair market value of $100,000, the property taxes would be calculated by dividing the assessment by 100 and multiplying the product by the property tax rate established each jurisdiction. The amount of property taxes due would be calculated like this:
|Taxing Jurisdiction||Assessment Value||Property Tax Rate||Property Tax|
|State of Maryland||$100,000||0.1120||$112.00|
|City of Takoma Park||$100,000||0.5291||$529.10|
|EXAMPLE TOTAL PROPERTY TAX BILL||$1,633.80|