Q & A's on Semiannual Property Tax Payment

What is the difference between annual and semiannual tax payments?

As of in July of 2000, the taxes for your primary residence will be paid in two installments: one by September 30, and one by December 31; you still have the ability to elect a one-payment schedule.

Why was the law changed?

To reduce closing costs for home buyers. By moving to a two-payment property tax system, persons buying homes will pay less property tax at settlement.

I have heard I will get a big tax refund. Is it true?

If you have a mortgage, your lender typically pays your property taxes annually from your escrow account. Part of your monthly payment to your lender, or escrow agent, includes an amount equal to one-twelfth of your annual property tax bill. By switching from one to two payments, you will create a one-time surplus in your escrow account that must be returned to you. Technically, this is not a tax refund, but a refund of surplus funds in your escrow account.

What must I do to obtain my refund?

Nothing. Your escrow agent annually calculates the amount needed to pay property taxes, insurance, and other charges for the next year for your property. Each year you receive a copy of that escrow analysis. If there is a surplus in your escrow account, the escrow agent will send you a check for that amount. The timing of the escrow analysis and the resulting payment of any surplus amounts varies by lender, but is frequently done after the end of the calendar year.

I have also heard that this will cost me money. Is that true?

Under the two-payment plan, the local governments may add a service fee of up to 1.65% of the second payment to your tax bill. This amount is to compensate the local government for lost interest and additional administrative expenses of sending two tax bills. This fee will be added to the second payment. Click here for a list of service fees imposed by county and municipal governments.

 

How much money will I get back?

You can get a rough idea of the amount of surplus escrow funds that will be rebated as follows:

1. Look at your last tax bill, and find the amount for your property taxes only. Do not include additional fees that may be on your tax bill such as front-foot assessments, trash collection, or other taxes not based on the assessment on your home.
2. Divide that amount by 12. This is roughly what you pay in property taxes each month to your lender.
3. Find your county in the list below to get the multiplier:
   
   

Why does the refund differ in different counties?

Tax payments are generally made by lenders at the latest date possible. Some counties offer a discount for paying the tax bill before September 30. If a county offers this discount, federal law requires your escrow agent to take advantage of it because it saves you money. Since everyone's second payment will be due by December 31, and the first payments are made at different times, there is a difference in the number of months between the two payments. The refund you get is based on the amount of time between the first payment and the second payment.
Note: Not all of the provisions of this law apply in Frederick County, for which there is a different statutory arrangement for property tax payments. Contact your lender to find out how and when your taxes will be paid and what effect any change may have on your escrow account.

Will I still get my early payment discount?

Unless your county limits the discount to taxpayers paying the full amount in one payment, you will still get your early payment discount, but it will only be on the part of the payment made by the early payment deadline (usually July 31 or August 30).

What other factors may affect my refund?

There are other items that may be paid by your escrow agent. The most common is your homeowners insurance premium. If your insurance premium goes up, this will reduce the surplus in your escrow account, and thus the refund you will get. Also, if your property assessment is increasing, and your local government does not reduce taxes to offset this increase, your taxes will go up, reducing your refund. Local governments that do not decrease their tax rate to offset the increase in assessments are required to publish advertisements in a local newspaper advising property owners that their taxes will be increasing. This information will also be included on your tax bill under the heading "Constant Yield Tax Rate."

Are other charges on my tax bill paid in two installments?

If other fees are sent on the same bill along with your property tax, such as garbage collection, sewer & water, or other fees, they may all be due with the first half of your tax.

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If you have questions about your property tax assessment or tax payments contact your local assessment office.