Baltimore City CHAP Tax Credit – What You Need to Know

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Mike Blog CHAP

It is no secret that Baltimore City has the highest property taxes within the state of Maryland. At a combined 2.36% of assessed property value, the tax bill for a home in Canton, Federal Hill, Fells Point or any of the city’s other historic districts can be eye opening.

To help offset the tax burden, the city offers various credits to property owners. Of them, the CHAP credit is arguably the biggest and most beneficial but occasionally misunderstood.

In short, CHAP stands for “Commission for Historical and Architectural Preservation” and was established in 1964 by the City of Baltimore. The commission’s mission is “The CHAP Mission is to enhance and promote the culture and economy of Baltimore through the preservation of buildings, structures, sites and neighborhoods, that have aesthetic, historic and architectural value.”

One of the things that CHAP does to achieve its mission is to promote renovation of residential real estate that maintains key historical architectural features from the period of significance. One of the ways that this is achieved is through offering a significant tax credit to those that renovate or purchase a home while maintaining key features.

When a home is granted a CHAP tax credit, the city offers a credit equal to the difference between pre-renovation value and the post-renovation value.

For example, if a home’s assessment is $120,000 prior to a significant renovation, the combined tax bill would be $2832 annually ($120,000 x .0236) or $236 of a monthly payment. If that same home underwent a significant renovation and the new assessment increased to $350,000 as a result, the new tax bill would be $8260 annually ($350,000 x .0236) or $688 in a monthly payment or a difference of $452 monthly. With a CHAP tax credit in place, the owner would receive a special credit in the amount of $5428 annually for ten years. In this example, having a CHAP credit would save the owner $54,280 over the course of the first 10 years of ownership.

As a result of the tax savings from the credit, buyers often realize that their buying power increases significantly when looking for CHAP homes. In the example above, assuming at a monthly payment is around $5 per $1000 financed, saving $452 monthly in taxes theoretically equates to around an additional $90,000 in the loan amount for an equal monthly payment.

The CHAP tax credit is one of the few that is transferable, and stays in place even if the property is not your primary residence.

If you are considering purchasing buying or selling a Baltimore City CHAP credit house, contact our team today. We would be happy to show you available CHAP credit properties and guide you through the process.

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