Here are some of the most important changes and benefits affecting the approximately 3.5 million taxpayers working on their 2018 Maryland income tax returns.
Opening of the 2019 Tax Filing Season
Maryland will begin processing personal income tax returns for Tax Year 2018 on the same day the Internal Revenue Service (IRS) begins accepting returns. The IRS has announced an opening date for personal income tax returns to begin on January 28, 2019. Note: If the IRS experiences delays, these delays will postpone our opening date.
We plan to begin processing business returns the same day the IRS begins accepting returns. The IRS has announced an opening date for business returns to begin on January 8, 2019. No returns will be processed before the start-up dates, even if sent prior to that date. The Comptroller's Office recommends filing electronically to ensure returns are received and processed quickly.
Claiming Business Income Tax Credits
For tax years beginning after December 31, 2012, you must file your tax return electronically in order to claim a business tax credit unless you submit a waiver from the electronic filing requirement. To request a waiver from filing the Form 500CR electronically, you must submit a completed Form 500CRW Waiver Request For Electronic Filing of Form 500CR and it must be attached to Form 500CR in the filing of your return.
Beginning with Tax Year 2015 certain individual taxpayers may elect to claim the Community Investment Tax Credit and/or the Endow Maryland Tax Credit on Maryland Form 502CR, and thus avoid the electronic filing requirement. Read instructions to Form 502CR to see if you qualify for this election.
Personal income tax returns are due by April 15, 2019.
Business income tax return dates vary. See Filing Extensions and Deadlines for Corporations
Local Taxpayer Service Offices
Taxpayer Service Offices will be open from 8:30 a.m. to 4:30 p.m., Monday through Friday to help taxpayers fill out and electronically file Maryland income tax forms for free. Please bring any W-2 statements or other withholding statements, such as 1099s, that you have, along with your completed federal income tax return.
New Tax Rates
- Local Tax Rate Changes - For tax year 2018, Cecil County has increased its rate to 3.00%. For tax year 2019 Caroline County has increased its rate to 3.2%. Please note the rate on 2019 Form PV.
Exemptions and Deductions
There have been no changes affecting personal exemptions on the Maryland returns.
Personal Exemption Amount - The exemption amount of $3,200 begins to be phased out if your federal adjusted gross income is more than $100,000 ($150,000 for joint taxpayers). The $3,200 exemption is phased out entirely when the income exceeds $150,000 ($200,000 for joint taxpayers). See Instruction 10 in the Resident tax booklet for the reduced amounts, or review the page, Determine Your Personal Income Tax Exemptions. The additional exemption of $1,000 remains the same for age and blindness.
Dependent Form 502B - will be required to be attached to Form 502, Form 505 and Form 515 to determine what exemptions you are entitled to claim.
Standard Deduction – The tax year 2018 standard deduction is increased to a maximum value of $2,250 for single taxpayers and to $4,500 for head of household, a surviving spouse, and taxpayers filing jointly.
Itemized Deduction Limitation - The State of Maryland follows the new federal tax law treatment to suspend the itemized deduction limitation threshold (Pease Limitation). This means that high-income taxpayers are not required to reduce their itemized deductions using the itemized deduction worksheet used in prior years.
Should I take the standard deduction or itemize? - The federal tax reform of 2017 significantly raised the federal standard deduction. Under current Maryland law, if you take the standard deduction the federal level, you cannot itemize at the Maryland level. You may take the federal standard deduction, while this may reduce your federal tax liability, it may result in an increase to your Maryland income tax liability. The Comptroller’s Office encourages you to run your income tax returns under both deduction methods, and to compare the results of taking the standard deduction versus itemizing yours deductions, to see which method causes the lowest overall tax liability.
Limitation on deduction for state and local tax - Federal tax reform limited the amount you can deduct for state and local taxes. You cannot claim more than $10,000 ($5,000 for married filing separately) for state and local taxes you paid. The new federal limitation impacts your Maryland return because you must addback the amount of state income taxes you claimed as federal itemized deductions. The addback is limited to $10,000 ($5,000 for married filing separately) and is reported on line 17b of the Maryland Form 502. Maryland will accept any reasonable interpretation of the limitation reported on line 17b. A reasonable interpretation of the law includes the following example: you, a single filer, paid $8,000 in real property taxes and $4,000 in Maryland state income taxes, Maryland will accept an addback of state income tax of $2,000 on Line 17b. In this example, the real estate taxes make up $8,000 of your $10,000 limitation and only $2,000 are required to be added back as state income taxes.
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 Post Offices - The Comptroller's Office no longer supplies local post offices with tax booklets.
- 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 (410) 260-7951, or by e-mail at email@example.com.
Increased pension exclusion - Maryland's maximum pension exclusion, which is available to qualifying taxpayers who are age 65 or older; are totally and permanently disabled; or have a spouse who is totally and permanently disabled, increased from $29,900 to $30,600 for tax year 2018.
Pension exclusion for qualifying retired correctional officer, law enforcement officer or fire, rescue, or emergency services personnel – Pursuant to House Bill 296 (Acts of 2018), the pension exclusion for Retired Law Enforcement Officer or Fire, Rescue, or Emergency Services Personnel has expanded eligibility to include retirement income of correctional officers. Up to a $15,000 subtraction for resident retired law enforcement officers, fire, rescue and emergency personnel who are at least 55 years old and (1) were employed by the State, a political subdivision of the State, or the federal government, and (2) receive pension income related to their above employment. An individual may not claim both this subtraction and the standard pension exclusion.
Subtraction modification updates for tax year 2018:
- Increase to the existing Honorable Louis L. Goldstein Volunteer Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program maximum amount from $4,500 to $4,750.
- Increase to the existing Honorable Louis L. Goldstein Volunteer Police Personnel Subtraction Modification Program maximum amount from $4,500 to $4,750.
- The mileage rate for certain qualifying charitable use of a car on Form 502V has increased from 53.5 cents to 54.5 cents.
- A new subtraction modification is available for any amount included in federal adjusted gross income for the first $50,000 of compensation received by an individual during the taxable year in exchange for the sale of a perpetual conservation easement on real property located in the State of Maryland. If filing a joint return each spouse is entitled to claim up to the maximum amount allowed.
- A new subtraction modification of up to $7,500 is available for living organ donors who incur qualified expenses attributable to donation of that individual’s organs. “Organ” means all or part of an individual’s liver, kidney, pancreas, intestine, lung, or bone marrow. "Qualified expenses" means any unreimbursed travel or lodging expenses or lost wages. In the case of a joint return each spouse is entitled to claim the maximum subtraction amount.
- A new subtraction modification is available for full-time Kindergarten through Grade 12 classroom teachers. Teachers may subtract up to $250 of unreimbursed expenses paid or incurred during the taxable year for the purchase of classroom supplies used by students in the classroom or by the teacher to prepare for or during classroom teaching. A teacher may not subtract any expense that has already been subtracted from federal adjusted gross income under §62 of the Internal Revenue Code.
- Beginning tax year 2018, an individual without a qualifying child may claim the earned income credit without regard to the minimum age requirement under the Internal Revenue Code if they are otherwise eligible for the federal credit.
- The age requirement decreases from age 65 to 55 to be eligible to claim the increased amount of subtraction modification of up to $15,000 of certain military retirement income to the extent included in the federal adjusted gross income.
Individual Taxpayer Changes
- New Maryland Payment Voucher Worksheet (PVW) and Form PV: The paper Forms 502D and 502E have been discontinued. The PVW must be used to determine the amount of the estimated payment or extension payment required. Payment must be sent using the new Form PV. The Form PV replaces the Forms IND PV, 502D and 502E for remitting payments. The Form PV must be used to remit payments for Forms 502 or 505, and Estimated and Extension payments.
- Interest Rate Decrease: The annual interest rate decreases from 11.5% per annum to 11% per annum on January 1, 2019. The annual interest rate changes again on January 1, 2020. Interest is due at a rate of 11% annually or .9167% per month for any month or part of a month that a tax is paid after the original due date of the 2018 return but before January 1, 2020.
- Updated Form 502CR, Part E: Reflects a maximum credit of $420 for the payment of Long-Term Care Insurance Premiums for a resident age 40 or younger for whom this credit has never been claimed.
- Refundable earned income tax credit (REIC): For 2018, the REIC amount for eligible residents is 28% of the federal EIC.
- Income tax credit on Form 502CR for student loan debt: A new refundable income tax credit available for certain individuals who have incurred at least $20,000 in undergraduate student loan debt has expanded eligibility to include graduate school debt. Certification must be attached.
- The maximum credit amount under the existing Oyster Shell Recycling Tax Credit has increased from $750 to $1,500.
- The new Venison Donation – Feed the Hungry Organizations Tax Credit provides that individuals who hunt and harvest an antlerless deer in compliance with State hunting laws and regulations, and donate the processed meat to a venison donation program administered by a qualified tax exempt organization, may claim a credit against their State personal income tax for up to $50 of qualified expenses to butcher and process an antlerless deer for human consumption.
- The new credit titled the Independent Living Tax Credit allows an individual to claim a credit against their Maryland State income tax equal to 50% of the qualified expenses incurred during a taxable year to install accessibility and universal visitability features to or within a home.
- A new credit is available for an individual or business on certain costs to install an energy storage system paid or incurred during the taxable year.
- A new credit may be claimed by a buyer of cybersecurity technology or cybersecurity services, subject to certain maximum amounts.
- Many state revenue agencies, including Maryland, are requesting additional information in an effort to combat stolen-identity tax fraud and to protect you and your tax refund. If you and your spouse have a driver's license or state issued identification card, please provide the requested information from it. The return will not be rejected if you do not provide a driver's license or state-issued identification. If you provide this information, it may help to identify you as the taxpayer.
Business Taxpayer Changes
New business tax credits: There are four new business tax credits available, Small Business Relief Tax Credit, Cybersecurity Incentive Tax Credit, Energy Storage Systems Tax Credit, and More Jobs for Marylanders Tax Credit. See Parts B, H, R, and S of Instructions to Form 500CR for more information.
Reminder about Electronic Format: For tax years beginning after December 31, 2012, you must file your tax return electronically in order to claim a business tax credit unless you submit a waiver from the electronic filing requirement. To request a waiver from filing the Form 500CR electronically, you must submit a completed Form 500CRW Waiver Request For Electronic Filing of Form 500CR and it must be attached to Form 500CR in the filing of your return.
Beginning with Tax Year 2015, certain individual taxpayers may elect to claim the Community Investment Tax Credit and/or the Endow Maryland Tax Credit on Maryland Form 502CR, and thus avoid the electronic filing requirement. Read Instructions to Form 500CR to see if you qualify for this election.
Changes to business tax credits:
- Single Sales Factor Apportionment: For apportioning income to the state for corporate income tax purposes, a single sales factor formula will be phased in over a five year period beginning in tax year 2018.
- The eligibility requirements have been expanded for the One Maryland Economic Development Tax Credit. The number of new jobs required has been lowered to 10 qualifying positions for eligibility for a maximum credit of $1,000,000. Tax credit may be claimed against the entire income of the business, rather than only the income from the One Maryland project.
- The new Small Business Relief Tax Credit allows that small businesses which employ a qualified employee may claim a credit against state income tax for certain benefits provided to that employee. A qualified employee is one who earns wages equal to or less than 250% of the annual federal poverty guidelines for a single-person household.
- The new Energy Storage Systems Tax Credit is for certain costs to install an energy storage system paid or incurred during the taxable year. You must obtain a tax credit certificate from Maryland Energy Administration before claiming this credit.
- The new More Jobs for Marylanders Tax Credit allows that a manufacturing business which is located within Maryland may be entitled to a 10-year income tax credit based on the total amount of wages paid for each qualified position at an eligible facility.
- There is a new Cybersecurity Incentive Tax Credit. A credit is available for an investment in a qualified Maryland cybersecurity company (QMCC). A qualified investor is an individual or entity that invests at least $25,000 in a QMCC that is required to file an income tax return in any jurisdiction.
Tax Professional Changes
Please see the latest updated list of approved eFile software vendors for individuals and businesses.
The new Maryland Power of Attorney Forms are now available.
Fiduciary Tax Changes
New business tax credits: There are new business tax credits available, the Small Business Relief Tax Credit, Cybersecurity Incentive Tax Credit, Energy Storage Systems Tax Credit, and More Jobs for Marylanders Tax Credit. See Parts B, H, R, and S.
Maryland Form 504NBD is an attachment to Form 504. Form 504NBD is the Nonresident Beneficiary Deduction Summary Sheet. A copy of the federal Form 1041 for Estates and Trusts is required to be attached with the Maryland Form 504NBD. The information required is the income from intangible personal property accumulated by the fiduciary for later distribution to nonresident beneficiaries. This income is not taxable to a nonresident, and is reported on Maryland Form 504NBD.
Beginning with tax year 2017, Schedule A is detached from Form 504 and renamed Form 504 Schedule A. This detachment was done to help us process paper-filed tax forms faster.