Overview
School impact taxes, along with transportation impact taxes, are one of the Development Impact Taxes established by Chapter 52 of the County Code. They are assessed on new residential buildings in the county to help fund school construction projects necessary to increase public school capacity.
Development impact tax rates are updated every two years, taking effect on July 1 of each odd-numbered calendar year. School impact tax rates are recalculated by the Planning Department on behalf of the Department of Finance based on the latest school enrollment data, housing inventory data, and school construction costs. School impact taxes are calculated for four housing types in two context-based geographies called school impact areas, as described in the Council-adopted Growth and Infrastructure Policy (GIP).
In its simplest form, the calculation is as follows:
Average # of Students per Unit x School Construction Cost per Student = Impact Tax per Unit
The average number of students per unit, also known as a student generation rate or SGR, is calculated for a given geography and unit type by Montgomery Planning using official Montgomery County Public Schools (MCPS) enrollment data. Note that the enrollment data is scrubbed of all personally identifiable information before being provided by MCPS.
The school construction cost per student also comes from MCPS and reflects the cost to build a new school to preferred student capacity levels (including all site work, furniture and equipment, but not the potential cost of land when that is necessary).
The County Council has full discretion over how the tax rates are calculated, but Montgomery Planning typically offers recommendations through the Planning Board as part of the quadrennial update to the GIP. In 2023, the Council passed Expedited Bill 25-23, which established a 20% cap on the impact tax rate, and allowed for the carryover of excess tax rates for future rate calculations.