Every Bethesda listing sheet shows an annual property tax figure, usually somewhere near the HOA dues and the lot size. In Montgomery County this year, that figure describes the seller's bill. A new owner's first bill is built differently, and the 2026 budget made the difference larger.
Montgomery County requires a seller of residential property to estimate the property tax for the following levy year and disclose it to the buyer. The county's tax information page explains that that a buyer "will not be eligible for the homestead credit in the first year following purchase," so "the difference between the current year's and next year's tax can be significant." For a Bethesda purchase this winter, the number to budget from is the one on that disclosure, which may be well above the bill printed on the listing.
What Changes on the Bill When the Deed Changes Hands
Three parts of a Montgomery County tax bill behave differently for a new owner. Two of them are permanent features of Maryland's system. The third arrived with the FY27 budget.
- The homestead cap stops for a year. Maryland, Montgomery County and the municipalities limit the annual increase in taxable assessment on a principal residence to 10%. The county says that limit "is not applicable the first year following the purchase of a home, and therefore the taxable assessment may be higher than it was for the previous owner." The Maryland Department of Assessments and Taxation says it mails new purchasers a homestead application after the deed is recorded and its records are updated.
- The $692 credit is gone for everyone. The Income Tax Offset Credit appeared on bills as "County Property Tax Credit." It was $692 in levy year 2025, and the County Council reduced it to $0 for levy year 2026.
- Assessments are rising while the rate held about steady. The FY27 budget schedule shows the countywide real property rate going from $0.8332 per $100 in FY26 to $0.8296 in FY27, a slight dip. Even so, the county expects the average homeowner to pay $23 more a month because of rising assessments.
The first item affects only buyers. The second and third reach every owner, but a listing photographed last spring may still show a bill from levy year 2025, with the $692 credit still on it.
How the Seller's Cap Turns Into the Buyer's Gap
The homestead credit matters most on homes the seller has owned for a long time. When assessments climb faster than 10% a year, the cap holds the owner's taxable assessment below the full assessed value, and the gap between them builds year after year. SDAT's own homestead page says that because of assessment increases and low local caps, "many homeowners in the State have been receiving substantial homestead credits each year on their property tax bills."
When the house sells, that gap comes due. Here is a hypothetical example that holds the rate fixed at the FY27 countywide real property rate of $0.8296 per $100 of assessed value, which combines the $0.7176 general county rate and the $0.112 state rate:
| Line on the bill | Seller's bill with the cap and the 2025 credit (hypothetical) | Buyer's first full bill (hypothetical) |
|---|---|---|
| Assessed value | $1,000,000 | $1,000,000 |
| Taxable assessment after homestead cap | $900,000 | $1,000,000 |
| Countywide rate, per $100 | $0.8296 | $0.8296 |
| Countywide tax before credits | $7,466.40 | $8,296.00 |
| County Property Tax Credit (ITOC) | minus $692 | $0 |
| Net before other county charges | $6,774.40 | $8,296.00 |
That is $1,521.60 a year from two lines on the bill, with the rate held constant. The hypothetical leaves out the transit and fire taxes, which every taxpayer pays, and the special-area taxes such as parks and recreation, which depend on where the property is. It also assumes no assessment growth, which understates the change in a year when the county expects assessments to push bills higher.
The real gap on any given house depends on its parcel. A 1950s rambler owned by the same family for decades and a condo that last sold three years ago can sit at very different points on this curve, even if they're listed at similar prices.
Why the $692 Credit Drew So Much Attention
The ITOC cut was close. Bethesda Magazine reported that the Council's May 8, 2026 straw vote to eliminate the credit for one year passed 6–5. Council staff estimated that taking the credit from $692 to zero would add $139.7 million in FY27 resources. The Council approved the full $7.9 billion FY27 operating budget 9–2 on May 21, and it took effect July 1.
Owners noticed when the bills arrived. Montgomery Community Media reported in July that County Executive Marc Elrich, who opposed the change, said at his weekly briefing, "This is a tax increase no matter what the county said," and that many homeowners had been surprised to find the $692 credit gone.
For a buyer, the reaction matters less than the paperwork. The county describes the ITOC as reduced to $0 for levy year 2026, not repealed. According to the county's ITOC page, to qualify if a later Council sets the credit above zero, an owner needs a homestead application on file with SDAT by May 1, 2027 for it to appear on bills starting July 1, 2027. A buyer who closes this winter and sets the SDAT mailing aside would miss the homestead credit and lose eligibility for any restored ITOC.
The Calendar for a Winter Closing
The dates that matter for a Bethesda purchase between now and next summer fall in this order:
- December 31, 2026: The second semi-annual installment on principal-residence bills is due, and it becomes delinquent January 1.
- Late December 2026: SDAT mails reassessment notices. In Montgomery County, Area 3 properties, last assessed effective January 1, 2024, are reassessed effective January 1, 2027. A home under contract in January may get a new assessment that neither party had when they agreed on a price.
- Through 2028: Area 2 properties, reassessed for January 1, 2026, saw residential full cash values rise 12.6% countywide in Montgomery, and SDAT phases increases in evenly over three years. On those homes, the assessed value on this year's bill is a step toward a higher number.
- May 1, 2027: This is the county's stated deadline for a homestead application to be on file so a restored ITOC could appear on July 2027 bills.
SDAT's statewide release says reassessment increases are phased in evenly while decreases take full effect immediately. A parcel's SDAT record shows where its assessment sits in that phase-in.
Why This Matters More in This Market
A tax gap is easier to raise in negotiation when buyers have options, and Montgomery County has more inventory than it did a year ago. The Greater Capital Area Association of REALTORS' September 2026 Montgomery County report counted 2,447 active listings, up 27.2% from September 2025. Homes averaged 34 days on market and sold for 97.3% of their original list price, and the median sold price was $610,000, up 1.8%. Maryland REALTORS put the county at 3.0 months of inventory in September 2026, compared with 2.4 a year earlier.
These are countywide figures, and they show sellers giving up a few points from list price. On a long-held Bethesda home, an extra $1,500 or more a year in taxes is a recurring cost the buyer takes on. When the disclosed next-year estimate is much higher than the current bill, that difference belongs in the conversation about price.
A Few Questions Buyers Ask
Where do I see the next-year estimate? The county's Office of Consumer Protection estimated tax calculator is the tool tied to the seller disclosure requirement.
Does the homestead credit come back after the first year? A new owner who makes the property their principal residence can file a one-time application. SDAT says the home must be the owner's principal residence and the owner must have lived in it at least six months of the year, including July 1. Applications go through Maryland One Stop.
Will my lender's escrow catch this? Ask your loan officer which tax figure the escrow estimate uses. The county notes that every taxpayer gets the original bill and is responsible for making sure taxes are paid on time, even with an escrow account.
This post is general information, not legal, tax or financial advice. Please confirm the numbers for a specific property with SDAT, the Montgomery County Department of Finance and your own tax professional.
When we review a Bethesda home with buyers, the seller's next-year tax disclosure goes beside the listing sheet before an offer is written, and we check the parcel's SDAT record for its reassessment area and phase-in. If you'd like to compare those figures on a home you're considering, Shelly German can walk through them with you. Let's Connect.
