Maryland Individual Tax Update for 2019 Filing Season
January 8, 2020
The Maryland Comptroller’s Office announced important information that will affect individual taxpayers for the 2019 tax filing season. The topics addressed in the announcement include exemptions and deductions, pension exclusion, subtraction modifications, and identity protection. Additionally, several localities have increased their local income tax rates, effective January 1, 2020.
The following post summarizes the latest announcements and how they affect individual tax payers.
Exemptions and Deductions
For 2019 the personal exemption of $3,200 and additional exemption of $1,000, for those over age 65 or blind, remain unchanged from the 2018 filing season. The personal exemption amount is phased out if federal adjusted gross income (AGI) is more than $100,000 ($150,000 for joint taxpayers) and is phased out entirely when AGI reaches $150,000 ($200,000 for joint taxpayers).
The maximum allowable standard deduction of $2,250 for single taxpayers also remains unchanged from 2018. Those filing under the head of household, surviving spouse, or married filing jointly statuses receive a slight increase to $4,550 from $4,500 in 2018.
Regarding standard itemized deductions, Maryland continues to conform with the federal reform of 2017. The federal standard deduction has been increased to $12,200 and $24,400 for 2019. Under current Maryland law, if a taxpayer elects the federal standard deduction, they cannot itemize on their Maryland returns. Although electing to take the standard deduction may reduce federal tax liability, it may result in a greater increase to Maryland tax liability. SC&H Group’s tax planning team is available for consultation regarding this issue to help ensure that the appropriate election is made when you are considering whether to itemize deductions.
For qualifying taxpayers, the maximum pension exclusion has increased from $30,600 to $31,100 for the 2019 tax year. Those eligible for the pension exclusion include those who are age 65 or older, permanently disabled, or have a spouse who is totally and permanently disabled.
Additionally, a $15,000 subtraction is available for resident retired law enforcement officers, and fire, rescue and emergency personnel who are at least 55 years old. This subtraction is only available to those who receive pension income related to their employment by Maryland, a political subdivision of Maryland, or the federal government. A taxpayer cannot claim both this subtraction and the pension exclusion discussed above.
The following subtraction modifications have been updated for the 2019 tax year:
- An increase to the existing Honorable Louis L. Goldstein Volunteer Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program to a maximum amount of $5,000.
- An increase to the mileage rate for certain qualifying charitable use of a car to 58 cents.
- In addition to a subtraction for Child Care Expenses, taxpayers can also be entitled to a credit for the taxable expenses.
- Subtraction of up to $5,000 of military retirement income, including death benefits, received by a qualifying individual under the age of 55; or up to $15,000 of military retirement income, including death benefits, received by a qualifying individual if the taxpayer is over the age of 55.
As the sophistication of those engaging in tax fraud continues to increase, Maryland is requesting, but not requiring, additional information from driver’s licenses or state-issued identification cards. This information is encouraged to be submitted in order to reduce the possibility of tax fraud and to protect taxpayer refunds.
Local Tax Rates
For tax year 2020, the following Maryland localities have increased their local income tax rates:
- Anne Arundel County – 2.81% (an increase from 2.50%)
- Baltimore County – 3.20% (an increase from 2.83%)
- Dorchester County – 3.2% (an increase from 2.62%)
- Kent County – 3.2% (an increase from 2.85%)
- Mary’s County – 3.17% (an increase from 3.00%)
- Washington County – 3.2% (an increase from 2.80%)
- Worcester County – 2.25% (an increase from 1.75%)
- Nonresidents – 2.25% (an increase from 1.75%)
Tax compliance and planning in each of the areas outlined above is essential to the minimization of your overall tax liability. Navigating the tax planning and compliance necessary to maximize these benefits may require the assistance of a tax professional.
This communication is not intended to provide tax, legal, insurance or other professional advice. Any action taken based on information in this communication should be taken only after a detailed review of the specific facts, circumstances of your individual situation and current law. Please contact one of the professionals at SC&H Group for further guidance.