If you are 65 or older or totally disabled (or your spouse is totally disabled), you may qualify for Maryland's maximum pension exclusion of $29,900 under the conditions described in Instruction 13 of the Maryland resident tax booklet. If you're eligible, you may be able to subtract some of your taxable pension and retirement annuity income from your federal adjusted gross income.
This subtraction applies only if:
- You were 65 or older or totally disabled, or your spouse was totally disabled, on the last day of the tax year; and
- You included on your federal return income received as a pension, annuity or endowment from an "employee retirement system." Please note that these include defined benefit and defined contribution pension plans, 401(a) plans, 401(k) plans, 403(b) plans, and 457(b) plans.
- A traditional IRA, a Roth IRA, a simplified employee plan (SEP), a Keogh Plan or an ineligible deferred compensation plan does not qualify.
Complete the Pension Exclusion Computation Worksheet shown in Instruction 13 in the Maryland resident tax booklet. Be sure to report all benefits received under the Social Security Act and/or Railroad Retirement Act on line 3 of the pension exclusion worksheet - not just those benefits you included in your federal adjusted gross income.
To receive the benefit of the pension exclusion, be sure to transfer the amount from line 5 of the worksheet to line 10 of Form 502, and complete the remainder of your return, following the line-by-line instructions.