Maryland Tax Changes For 2021

Delaware Resident Working Out Of State

Q. Im considering taking a job in Maryland. I know the states do not have a reciprocal agreement. How does the credit work for taxes paid to another state? Will I owe County taxes in MD?

A. If you are a resident of Delaware who works in Maryland, you may take credit on line 10 of the Delaware return for taxes imposed by other states. You must attach a signed copy of your Maryland return in order to take this credit.

Even though you may not be liable for Maryland County Taxes, Maryland imposes a Special Non-resident tax on their non-resident income tax return.

Where To Send Your Maryland Tax Return

You can save time and money by electronically filing your Maryland income tax directly with the . Benefits of e-Filing your Maryland tax return include instant submission, error checking, and faster refund response times. Most tax preparers can electronically file your return for you, or you can do it yourself using free or paid income tax software, like the examples listed below.

To e-file your Maryland and Federal income tax returns, you need a piece of tax software that is certified for eFile by the IRS. While most in-depth tax software charges a fee, there are several free options available through the states, and simple versions are also offered free of charge by most tax software companies.

The two most popular tax software packages are H& R Block At Home, sold by the H& R Block tax preparation company, and TurboTax Federal & State, sold by the Intuit software company. Both companies produce multiple editions for simple to very complex tax returns, so be sure to carefully compare the features offered by each package.

Tax Revenues Expected To Increase By Nearly $1 Billion More Than Previous Estimate This Year

The Board of Revenue Estimates Comptroller Peter V.R. Franchot , Treasurer Nancy K. Kopp , and Budget Secretary David R. Brinkley unanimously accepted projections that assume state tax revenue of $21.1 billion in the ongoing 2022 fiscal year, a 5% increase since the board last set estimates in March.

The board also accepted the first official estimate for revenue in the 2023 fiscal year at $22.2 billion. That represents a more than $1.3 billion increase over the states most recent planning figures for 2023.

The revenue estimates come just after the states final accounting for the 2021 fiscal year, which ended with an unexpectedly large fund balance of $2.5 billion.

The numbers in todays forecast report and yesterdays news of a massive $2.5 billion fund balance present us with a unique, once-in-a-generation opportunity. All told, it means state budget writers and policymakers have nearly $5 billion in unanticipated revenue as they begin constructing the FY 2023 budget, Franchot said during the BRE meeting. Maryland now has a level of financial flexibility we have not experienced in decades.

According to the estimates, personal income tax revenues are expected to increase by $396 million more than previous estimates, and sales tax is expected to increase by $281 million in the current fiscal year. The sales tax increase is due in part to legislative changes to tax online sales and streaming, services that have expanded during the pandemic.

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Its Time To Plan Ahead For Maryland Pass

Tax planning is a year-round activity. As we approach the halfway mark of the year, its the perfect time to make sure you are well-prepared or begin planning for your projected year-end income. In that regard, Maryland Pass Through Entities should make sure they are considering the tax law change that went into effect in 2020.

In an effort to benefit Maryland taxpayers, the State Senate passed Bill 523 in May 2020, which states that pass-through entities now have the option to pay the tax imposed on a members distributive or pro rata share of income. Simply stated, this means that most PTEs, such as S-Corporations and Partnerships, may now directly pay tax on behalf of their resident members. This allows the state tax paid to become a deductible business expense, lowering the federal taxable income passed on to the members. In this article, we cover the implications of these tax changes for PTEs in the state of Maryland.

What Is The Minimum Income To File Taxes In 2021 In Maryland

02.03 of the State of Maryland. Maryland has six filing statuses based on the filing status used on your federal income tax return. Single Dependent taxpayers, regardless of whether income was earned or unearned, are not required to file a Maryland income tax return unless their gross income is $12,550 or more.

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Tax Information For Individual Income Tax

For tax year 2021, Maryland’s personal tax rates begin at 2% on the first $1000 of taxable income and increase up to a maximum of 5.75% on incomes exceeding $250,000 . Nonresidents are subject to a special tax rate of 2.25%, in addition to the state income tax rate.

There are special tax benefits available to taxpayers 65 and older, military retirees, low income families and families paying for child care. The deadline for filing your Maryland income tax is July 15, 2022, if you are filing on a calendar year basis.

Follow the links below for information on Maryland’s individual income tax, including what’s new for the current tax year, as well as rates, tax legislation, and frequently asked questions. Visit the Filing information section for information on the specifics of tax filing.

Overview Of Maryland Retirement Tax Friendliness

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Tax Forms Instructions & Booklets

The resident tax booklets contain both the tax forms and the instructions for each major form. The tax forms on the Web site are available separately from the resident and nonresident instruction booklets.

All of our tax forms have been reformatted to ensure enhanced readability when paper forms are filed. This format has increased the number of pages of some of the tax returns. Make sure that you attach all pages of your return to ensure that your return is processed correctly.

• Tax Forms and Instructions Online – Tax forms and instructions for Individual and Business taxpayers are available here online at Maryland Tax Forms and Instructions .
• Tax Booklets at Libraries – We have provided a limited supply of tax booklets to a number of libraries throughout the State that have requested them.
• Tax Booklets at Comptroller’s Taxpayer Service Offices – Tax booklets are available at all of our local taxpayer service offices.
• Request a Tax Booklet – Taxpayers may request a resident or nonresident tax booklet by calling 260-7951, or by e-mail at .

Getting Your Maryland Tax Refund

If your state tax witholdings are greater then the amount of income tax you owe the state of Maryland, you will receive an income tax refund check from the government to make up the difference.

It should take one to three weeks for your refund check to be processed after your income tax return is recieved. E-filing your return and filing early can help ensure your refund check gets sent as quickly as possible.

Once you’ve filed your tax return, all you have to do is wait for your refund to arrive. If you want to check the status of your Maryland tax refund, you can visit the Maryland Income Tax Refund page.

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Governor Hogan Signs Pte Legislation To Maximize The $10000 Salt Deduction

On November 9, 2020, the IRS informed it intends to issue proposed regulations supporting the use of Pass-Through Entity SALT Workarounds. This taxpayer-friendly development would affirm that a pass-through entitys owners or shareholders would not be limited in the amount deducted for state and local tax. Please review the article below regarding Notice 2020-75.

Learn more in our recent insight here.

May 2, 2020

Pension Exclusion For Retired Correctional Officer Law Enforcement Officer Or Fire Rescue And Emergency Services Personnel

Note: An individual taxpayer may not claim BOTH the standard Pension Exclusion and the Pension Exclusion for Retired Correctional Officer, Law Enforcement Officer or Fire, Rescue, or Emergency Services Personnel.

If you are 65 or older on the last day of the calendar year, you are totally disabled, or your spouse is totally disabled, and you have received qualified pension income, you should complete the Pension Exclusion Computation Worksheet regardless of your prior work history. It is permissible for one spouse to claim the standard Pension Exclusion and the other spouse to claim the Pension Exclusion for Retired Correctional Officer, Law Enforcement Officer or Fire, Rescue, or Emergency Services Personnel if each spouse meets the applicable required criteria.

If you meet the below criteria, use the Retired Correctional Officer, Law Enforcement Officer or Fire, Rescue, or Emergency Services Personnel Pension Exclusion Worksheet to calculate your eligible pension exclusion:

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How High Are Property Taxes In Maryland

rates are close to average, although taxes paid can be very expensive because of the states high home values. The average effective property tax rate in the state is 1.06%.

However, many Maryland homeowners pay at least $3,515 in property taxes per year, as the states median home value is quite high.

Deductions For Cash Donations To Charities In 2021

The CARES Act allowed taxpayers to claim a $300 credit for cash donations to charity, even if they claimed the standard deduction. The charitable donationwrite-off was extended for 2021.

An individual can claim a $300 deduction for cash contributions to qualifying charities in 2021. In addition, married couples filing jointly may claim a maximum deduction of $600 on their 2021 tax return. Most cash contributions qualify for the deduction, but there are a few exceptions.

Cash donations that are not tax deductible include those that were:

• Carried forward from previous years

• Made to charitable remainder trusts

• Paid to a support organization

• Intended to help maintain or establish a donor advised fund

• Paid to most private foundations

These exceptions apply to taxpayers claiming standard deductions or itemizing deductions.

Additionally, taxpayers who itemize deductions can qualify for a huge tax break. They can claim up to 100% of their AGI for cash contributions to qualifying charities in 2021.

The usual limit is 20 to 60 percent of adjusted gross income. However, the taxpayer must choose the new limit, or the old limit applies.

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Governor Hogan Announces $46 Billion Tax Relief Package For Hardworking Maryland Families Small Businesses And Retirees

Largest Tax Relief Package In State History, Includes Eliminating 100% of State Retirement TaxesAdditional $650 Million in Tax Relief for Working MarylandersMore Jobs For Marylanders Act 3.0 to Extend Successful, Job Creating Program Through 2027

ANNAPOLIS, MDGovernor Larry Hogan today announced the largest tax relief package in state history to deliver more than $4.6 billion in much-needed relief for hardworking Maryland families, small businesses, and retirees.

Next to our health recovery from the worst pandemic in more than a century, nothing is more important than our continued economic recovery, said Governor Hogan. With all of the important announcements we are making today, we are continuing our focus on delivering exactly what we promisedreal, long-term relief to hardworking Marylanders, small business, and retirees, creating more jobs and more opportunity in every corner of the state, and continuing to lead the nation in economic recovery so that our state comes back even stronger and better than ever before.

View the slides from todays press conference.

Last fall, the governor announced a five-point framework for the record budget surplus, including increasing the Rainy Day Fund, major tax relief for retirees, direct tax relief for Marylanders, additional relief for underserved Marylanders, and enhancements for state employees.

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Work Opportunity Tax Credit

This law creates a non-refundable tax credit against state income tax or up to 50% of the federal Work Opportunity Tax Credit that an employer claims for a qualified employee who works in Maryland.

This new credit becomes effective July 1, 2022, and applies to tax years 2022 through 2028. Federal tax law requires that you cannot deduct wages that are utilized to generate a federal tax credit. Maryland currently has a subtraction modification in place for this wage deduction adjustment when an employer receives a federal Work Opportunity Tax Credit. This subtraction will not apply to the new Maryland credit.

Employers will receive federal and Maryland credits for hiring veterans, ex-felons, summer youth, and certain other target groups. The IRS provides additional details on target groups on their website.

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Refund Of Erroneous Withholdings

Q. My company moved its office from Delaware to Ohio last year. I had an employment contract and the company paid me according to this contract, although my employment was terminated this year. They have taken Delaware State income tax out of my payments for part of this year. I would like to know under these circumstances why they continue to take out Delaware state tax and what if any tax liability I have, considering I do not live in Delaware and have not worked in Delaware this year. If there is any tax liability, please provide me details of why and tell me how to calculate Schedule W, which clearly shows there is no apportioned Delaware income when no days are worked in Delaware for a non-resident.

A. You must file a non-resident tax return to receive a refund of erroneously withheld Delaware income taxes if you did not live or work in the State of Delaware at any time during the taxable year.

You must attach to your Delaware return certification from your employer that:

Expanded Child Tax Credit For 2021

TheAmerican Rescue Plan increased the Child Tax Credit to $3,600 for children under six years and $3,000 for children over six years. In addition, the age limit for the Child Tax Credit increased from 16 to 17 years old.

Taxpayers qualify for the full credit if their modified adjusted gross income was $75,000 or less for single filers. Married couples filing jointly can earn up to $150,000 AGI and receive the full credit.

If taxpayers earned more than the maximum AGI and received advance child tax credit payments, they may have to pay some of the tax credit back.

The IRS Tax Credit Update Portal confirms the advance payments you received.

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Earned Income Tax Credit

You can claim the Maryland Earned Income Tax Credit if you claimed the EITC on your federal return.

The federal EITC income cap ranges from $21,430 to $57,414 depending on how you file and how many children or relative dependents you claim. The maximum federal EITC amount you can claim on your 2021 tax return is $6,728.

If you are a married couple filing separately or jointly, or you have at least one qualifying child, you can claim 50% of the federal credit on your Maryland tax return. If you are a single filer, head of household, or surviving spouse without a qualifying child, you may claim the full amount of the federal EITC.

If your Maryland EITC is higher than your Maryland tax, you may be eligible for a refund.

Notification Of Local Rate Change To Comptroller

Pursuant to Annotated Code of Maryland, Tax-General Article § 10-106, a county must provide notice of a county income tax rate change to the Comptroller on or before July 1 prior to the effective date of the rate change.

To give notice of a county income tax rate change, you must submit a certified copy of the County Council passed ordinance or bill on or before the deadline required by law.

You should mail your notice to:

You should also cc Andrew Schaufele and Wayne Green at:

Annapolis, MD 21404-1829

Resources for Local Governments Regarding Local Income Tax Requirements

• Local Income Tax Distribution Archive – County by county and city by town distributions of local income tax. Also included in the distribution of local income tax revenue are comparisons of delinquent distributions and fiduciary distributions by county, and by municipality.
• Local Income Tax Rate Changes – Instructions on how to notify the State of Maryland Comptroller’s Office of changes to local income tax rates by counties
• Local Tax Rates: A chart depicting each county and the City of Baltimore’s local income tax rates.
• Income Tax Summary Report Archive – This summary report is an analysis of Maryland resident and nonresident personal income tax returns filed for a given calendar year.

See the Legislative Summaries below and then choose the year of legislation.

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