Are rising assessments making you nervous about your next property tax bill in Kensington? You’re not alone. When values jump, it’s natural to worry about cash flow and how to plan for a move. The good news is that Maryland’s Homestead Property Tax Credit can soften the impact, and Kensington goes a step further with a stricter local cap. In this guide, you’ll learn how the state program works, how Kensington’s 5% town cap differs from the 10% county and state cap, and what it means for your budget and timing. Let’s dive in.
Homestead credit basics
Maryland’s Homestead Property Tax Credit is designed to prevent sudden tax spikes when your home’s assessed value rises quickly. If your home qualifies, the credit limits how much of that increase can be used to calculate your property taxes for the next tax year.
The program works by capping the year-over-year growth of your taxable assessment. Statewide, the homestead cap commonly referenced is 10%. That means, even if your assessed value rises 20% in a year, the portion used to compute eligible county and state taxes cannot increase by more than 10% from the prior year’s taxable assessment.
Local governments can adopt their own stricter caps for the taxes they levy. That’s where the Town of Kensington comes in.
Kensington’s 5% town cap
Kensington applies a lower cap on the taxable-assessment increase for the town portion of your bill. While county and state taxes use the 10% cap under Maryland’s program (for eligible homes), Kensington limits the annual increase used for the town levy to 5% for qualifying properties.
Here’s what that means on a typical bill:
- County and state lines: Taxable assessment can rise up to 10% year over year if your home is eligible.
- Town of Kensington line: Taxable assessment used for the town levy can rise up to 5% if your home is eligible and the town’s rule applies.
The result is that, in a year with a big reassessment, the town portion of your taxes tends to grow more slowly than the county and state portions.
What it means for your budget
If you own and occupy your home in Kensington and qualify for the homestead credit, the town’s 5% cap can reduce short-term tax shock. You’ll likely see smaller year-to-year increases in the town line of your bill than you would under a 10% cap.
Keep in mind, the homestead credit affects the taxable assessment used for computing taxes. It does not change your home’s certified market assessment and it does not set your sale price. Buyers and appraisers look at market value, not the capped taxable amount.
Quick example
Let’s say your taxable assessment last year was $400,000. A new assessment increases your value by 25% to $500,000. With homestead protection:
- County/state taxable assessment (10% cap): $400,000 × 1.10 = $440,000
- Town of Kensington taxable assessment (5% cap): $400,000 × 1.05 = $420,000
Your county and state taxes would be calculated on $440,000, while your town taxes would be calculated on $420,000. The town portion increases more slowly because of the lower cap.
Buyer and seller tips
If you’re buying in Kensington:
- Verify whether the property currently has a homestead credit in place. This helps you estimate carrying costs.
- Remember that homestead protections do not automatically transfer to you. New owners generally need to meet eligibility requirements and file as required.
- When budgeting, model the next year’s bill using a 10% cap for county/state portions and 5% for the town portion, if you expect to qualify.
If you’re selling in Kensington:
- Understand that the credit influences annual tax bills, not market value. It should not be used to argue price.
- Share the most recent tax bill so buyers can see the breakdown of town vs county/state taxes and current taxable assessments.
- If you plan to close near a reassessment or tax year change, discuss prorations and how capped taxable values may shift.
How to verify and apply
Here’s a simple path to confirm status and take action:
Check eligibility with Maryland SDAT. Review the homestead program description, requirements, and application steps. If you’re a new owner, confirm when and how to file.
Review the property’s record and tax bill. Look at the SDAT property record card and your most recent tax bill to see assessed value, taxable assessment, and whether a homestead credit is listed.
Confirm the town’s 5% cap details. Contact Kensington’s finance office or check the town’s official materials to confirm how the 5% cap is applied to the town levy and whether any town-level steps are required.
Coordinate with Montgomery County. The County Department of Finance can explain how the state homestead cap is applied on county/state lines and how it interacts with town calculations.
Keep documentation handy. Save your SDAT record, tax bill, and any town or county correspondence for your files and for buyers or lenders who may ask.
Common pitfalls to avoid
- Assuming the credit transfers. Homestead protection is tied to owner-occupancy and eligibility. New owners should not assume it carries over automatically.
- Confusing taxable assessment with market value. The cap limits the taxable number for computing taxes. It does not change your home’s market value for pricing a sale.
- Missing changes in use. If a home shifts from owner-occupied to rental, or ownership changes mid-year, the status can change. Report updates per SDAT and local rules.
- Overlooking other credits. The homestead credit is separate from other programs. If you qualify for additional credits, verify how they interact with county and town taxes.
Simple checklist
- Confirm active homestead status on the property record.
- Pull the latest tax bill to see taxable assessments and the town vs county/state breakdown.
- Ask the Town of Kensington about any town-specific steps tied to the 5% cap and request the town ordinance or guidance.
- Model next year’s taxes using 10% for county/state lines and 5% for the town line, if you expect to qualify.
- Contact SDAT, Montgomery County Finance, and the Town of Kensington for the most current requirements and deadlines.
Final thoughts
Kensington’s local 5% cap can make a real difference in how your town taxes grow during periods of rising assessments. When you understand how the 5% town cap interacts with the 10% county/state cap, you can budget with confidence, plan your timing, and communicate clearly with buyers or sellers.
If you’re thinking about a move and want a clean, personalized tax-impact estimate, let’s talk through your property, timeline, and goals. Schedule a consultation with Unknown Company and get a tailored plan.
FAQs
What is the Kensington 5% cap?
- It is a local rule that limits the year-over-year increase in taxable assessment used for the Town of Kensington portion of your property tax bill to 5% for eligible owner-occupied homes.
How does the 5% cap affect my bill compared with 10%?
- For eligible properties, county and state taxes use the 10% homestead cap, while the town portion uses 5%. In a year with a large reassessment, the town line typically rises more slowly.
Does the homestead credit transfer to a new owner in Kensington?
- No. Homestead protections are tied to eligibility and owner-occupancy. New owners should review SDAT requirements and file as needed to obtain protection.
Does the credit change my home’s sale value?
- No. The credit affects the taxable assessment used for computing taxes. It does not change the certified market assessment and does not set your sale price.
How do I estimate next year’s Kensington taxes?
- Start with your current taxable assessment. Apply up to 10% growth for county/state lines and up to 5% for the town line, assuming you qualify for the homestead credit.
Do I need a separate town application for the 5% cap?
- Town procedures can vary. Contact the Town of Kensington finance office to confirm whether the town applies the cap automatically or requires any local steps.
