In 2022, the state of Maryland passed a tax relief bill that aims to reduce taxes for its retirees. This new state income tax credit is available to individuals aged 65 and over who receive pension income, income from a qualified retirement plan, such as a 401(k), IRA, or a defined benefit plan. Former Governor Hogan hopes this act will help Maryland become more tax-friendly for retirees, particularly our seniors, offering substantial relief.
This law creates a nonrefundable tax credit that offsets Maryland state income tax for a resident who is 65 years of age or older and whose federal adjusted gross income (AGI) does not exceed $150,000 for a joint filer, or $100,000 for a single filer.
- The credit amount is $1,000 for an individual filer or for a couple where only one person is 65 or older.
- If the taxpayer is filing a joint return and both parties are 65 or older, the credit amount is $1,750.
The law is effective for the 2022 tax year and the credit amount can be decreased if Maryland’s revenues do not hit specified targets in the future. Total tax relief from this Act is estimated to be $1.55 billion over the next five years.
To take advantage of this new tax credit and other tax savings opportunities, it’s essential to understand how your income, dividends, and capital gains can affect this credit. Therefore, we encourage you to consult your financial planner and tax advisor for personalized guidance.