01/28/2014 by CrabbyHomes 4 Comments
Baltimore City Chap Tax Credit – The Definitive Guide
If you are looking to purchase real estate in Baltimore City, chances are your Realtor has talked to you about CHAP credit properties. But do you really understand how CHAP credits work and how big the savings can be?
What is the Baltimore City CHAP Tax Credit?
It’s the most generous available tax credit in Baltimore City. The CHAP (Commission for Historical and Architectural Preservation) credit gives a 10-year credit to properties that have stayed within specific guidelines put in place by the city’s Historic Preservation. Guidelines include both exterior and interior parameters with the purpose to preserve the historic elements of a Baltimore City row house. The homeowner/investor has to re-invest a minimum of 25% of the full cash value on the property. In most cases the percentage of additional investment costs are closer to 75-100% more. Part of the approval process includes submitting photos of the property, a scope of work and a floor plan to the review panel BEFORE any construction starts. Once the improvements are complete and approved by the city, the credit is transferable from owner to owner through the life of the 10-year credit. The CHAP credit has not only been a contributing factor to the revitalization of the historic city neighborhoods but also made city living more affordable.
How does the CHAP tax credit protect Baltimore City historic districts?
Historic buildings in Baltimore were originally built using materials and techniques that today are more costly to use than more basic alternatives. By providing the tax break to only people who renovate properties using the more expensive, historically correct approaches, the CHAP credit is able to protect some of Baltimore’s most treasured buildings.
In addition to several commercial buildings, currently the designated Historical Neighborhoods are (subject to mapped limits): Arcadia/Beverly Hills, Auchentoroly Terrace, Baltimore East/South Clifton Park, Bancroft Park, Barclay/Greenmount, Barre Circle, Bellona-Gittings, Better Waverly, Bolton Hill, Brick Hill, Business & Government Center, Butcher’s Hill, Canton, Cathedral Hill, Cedarcroft, Charles Village/Abell, Dickeyville, Druid Hill Park, Dundalk, East Monument, Ednor Gardens, Eutaw Place/Madison Park, Federal Hill, Federal Hill South, Fells Point, Franklin Square, Franklintown, Gay Street, Greenmount Cemetery, Guilford, Hampden, Hochschild Kohn Belvedere & Hess Shoes, Hollins-Roundhouse, Homeland, Hunting Ridge, Jonestown, Lake Evesham, Lauraville, Little Montgomery Street, Locust Point, Loft, Madison Park, Market Center, Mayfield, Mill Hill- Deck of Cards (Wilkens Ave), Montebello State Hospital, Mount Royal Terrace, Mount Vernon, Mount Washington, North Central, Oakenshawe, Old Goucher, Old West Baltimore, Original Northwood, Otterbein, Park Circle, Patterson Park/Highlandtown, Perlman Place, Radnor-Winston, Railroad, Reser, Reservoir Hill, Ridgely’s Delight, Riverside, Roland Park, Saint Paul Street, Seton Hill, South Central Avenue, Stirling Street, Stone Hill, Ten Hills, Tuscanny- Canterbury, Union Square, Upper Fells Point, Upton’s Marble Hill, Washington Hill, Waverly, Windsor Hills, Woodberry, and Wyndhurst.
How to apply for Baltimore CHAP credits (get a Baltimore City Plan Review)
When investors purchase "shells", homes that are in need of total renovation, the property has an assessed value. Typically this assessment is very low. A good investor will petition the assessed value if it seems higher then what it should.
For example if a shell is SOLD for 50k and the assessment at the time of purchase is 90k, the buyer has the opportunity to file for an assessment appeal. A successful assessment appeal would result in a value of 50k or lower.
Before the investor/builder is able to start demo and construction, he/she must apply through the city agency for a pre-approval of the CHAP credit. This involves a form, a new layout drawing, an explanation of redesign, and pictures of the current historical home and its features. Some important new design features are wood windows in the front, removal of form stone, rounded down spouts and gutters, and the cornice preserved or replaced to mimic the historical character. Once the home has finished construction, it’s usually sold and reassessed.
How can help assist in the CHAP credit process on my behalf?
There are several attorneys that can assist many different ways. A good contact is Todd Heise, Esq. with Heise & Heise, LLP. Local to the Baltimore City area, with an office at 3218 Eastern Ave, Heise has hands on experience with aiding homeowners/investors in the document submission and appealing for accurate assessments. He can also help the new purchaser maximize their credit.
How much money can be saved with the CHAP credit program?
Using the example above let’s say the new value is 200k.
Are you paying attention? Here’s the savings:
1. Shell was assessed at 50k (city portion of taxes is 50k x 2.268% = 1134.00)
*2.268% is per $100.00 of value
2. The finished home is reassessed at 200k (city portion of taxes is 200k x 2.268% =4536.00)
3. The "frozen" savings is $150,000. (150k x 2.268% = 3402.00)
4. Year 1 taxes would be 4536 – 3402 = 1134.00
5. IF the property’s assessment changes to (for example) 250k, your taxes would be (250k x 2.286) – 3402 = 2268.00
44 Heath Street in Federal Hill is a good example of this credit. See the link for more details on this ACTIVE property. The progress of this home can be seen on my CrabbyHomes FB page. Below are some before and after photos. .