Home › Articles › When the CHAP Tax Credit Expires
When the 10-year CHAP credit ends, the City bills tax on the full taxable assessment again, so your City tax rises by roughly what the credit had been offsetting. Escrowed mortgage payments rise at the next escrow analysis. You can appeal an assessment to the State Department of Assessments and Taxation within 45 days of the notice.
I am Ed Drost, a Maryland State Certified Residential Appraiser. Owners who finished a CHAP project years ago often ask me what happens at the end, and buyers of CHAP houses ask the same question. The honest answer is that the savings stop and the bill returns to normal. Planning for that is easy if you know the number. This is part of our Baltimore appraisal Q&A series. For the full process, see the CHAP Historic Tax Credit Guide.
What changes in year 11?
The credit runs for 10 tax years, starting with the first tax bill after final certification. When the term ends, the City no longer offsets the tax on the increase in value. You pay City property tax on the full taxable assessment, like any other owner.
The jump is not mysterious. It is the same number the credit had been saving you. In my worked example from the formula article, a $200,000 increase in value at $2.248 per $100 produced a $4,496 a year credit. When that credit ends, the bill rises by about $4,496 a year, or $374.67 a month, if the assessment and rate are unchanged. Your own numbers will differ.
How does the end of the credit affect your mortgage escrow?
Lenders adjust escrow after reviewing the tax bill, usually once a year. So the increase may reach your payment later than the bill itself. When the new bill is paid out of escrow, the account can come up short, and the servicer may ask you to cover the shortage and raise the monthly amount.
- Find your credit's final year on your tax bill or your certification letter.
- Set money aside the year before, so a shortage does not surprise you.
- Call your servicer when the new bill posts and ask how and when the escrow will change.
How does the Homestead cap interact with the end of the credit?
The Homestead Tax Credit limits how fast the taxable assessment of an owner's principal residence can rise from year to year. In Baltimore City the cap is 4%, and it is scheduled to rise to 5% beginning in fiscal year 2028. The cap limits growth in the assessment. It does not keep the CHAP credit going, and it does not stop the City tax on the increase from returning at year 11. How the two interact on your bill depends on your property's assessment history, so ask the Department of Finance for a calculation on your parcel before you rely on any estimate.
What does the data show about expired credits?
| Measure | 2000 | 2019 |
|---|---|---|
| Assessed value of expired-credit properties | $17 million | $211 million |
| City property taxes paid by them | $1.3 million | $5.9 million |
The study found that the City recouped the 10-year credit in just over seven years after expiration, and projected $43 million in additional City tax revenue over the following nine years from properties with expiring credits. That tells you the credit is a trade, not a gift. The City defers part of the revenue for 10 years in exchange for a rehabilitated property that pays more afterward.
What if the assessment looks too high?
- Read the assessment notice from the State Department of Assessments and Taxation (SDAT) as soon as it arrives.
- Appeal to SDAT within 45 days of the notice date.
- If you disagree with the result, you can appeal to the Property Tax Assessment Appeals Board, and then to the Maryland Tax Court.
- Support the appeal with evidence. A certified appraisal and comparable sales are the strongest material I know of.
I prepare appraisals for assessment appeals. Do not wait for the bill to arrive, because the notice date, not the bill date, starts the 45 days.
Can you apply for CHAP again after the credit ends?
A new rehabilitation project is a new application, and it would have to meet the 25% test and the program's other rules. No new applications may be filed after December 31, 2027, under the current regulations, so whether a second project is possible depends on timing. Ask CHAP in writing before you plan one.
Common questions
Does the CHAP credit automatically end after 10 years?
Yes. The credit runs for 10 tax years, starting with the first tax bill after final certification.
How much will my taxes rise when the credit ends?
About the amount the credit had been saving you, if the assessment and rate are unchanged. Look at the credit line on your tax bill for your number.
Will my mortgage payment go up?
If your lender escrows taxes, yes, at its next escrow analysis. A shortage may be spread over the next year.
How long do I have to appeal an assessment?
45 days from the date of the SDAT notice.
Does the Homestead cap stop the increase?
It limits how fast the taxable assessment of a principal residence rises. It does not extend the CHAP credit. Ask the Department of Finance how it applies to your parcel.
Can I get a second CHAP credit on the same house?
A new project is a new application and must meet all rules, including the December 31, 2027 application deadline. Ask CHAP before you plan one.
Sources
- Baltimore City Historic Tax Credit, CHAP
- Historic Tax Credit Rules and Regulations, Baltimore City Department of Finance (effective December 14, 2020)
- An Analysis of the Baltimore Historic Preservation Tax Credit, PlaceEconomics (July 2020)
- 10 Key Facts About the Baltimore Historic Preservation Tax Credit Program, Preservation Maryland
This article is general information, not legal, tax or financial advice. Program rules change and every project is different. Confirm current requirements with CHAP and the Baltimore City Department of Finance before you start work.
More articles
Can You Combine Baltimore CHAP Tax Credits With Maryland and Federal Historic Tax Credits?
CHAP and the Maryland homeowner credit can be used on one project. The federal credit cannot be used on an owner-occupied home. How the three compare.
Which Baltimore Neighborhoods Qualify for the CHAP Tax Credit?
Which properties qualify for CHAP, how local and National Register districts differ, and how to check an address on CityView.
How Does the CHAP Tax Credit Affect Neighborhood Home Values?
What the 2020 PlaceEconomics study found about CHAP restorations and nearby values, the 500-foot data, and what the numbers cannot prove.