MARYLAND
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NICKNAME
The Free State
BOTTOM LINE: MIXED TAX PICTURE
Maryland does not tax Social Security benefits, and seniors may qualify for a pension exclusion that is worth up to $26,300. In addition to the state income tax, counties can levy an income tax, too. Maryland has a 6% statewide sales tax with exemptions for medicine and most nonprepared foods.
STATE SALES TAX
6% (food, prescription and nonprescription drugs are exempt).
INCOME-TAX RANGE
Low: 2% (on less than $1,000 of taxable income)
High: 5.75% (on more than $250,000 of taxable income)
Maryland's 23 counties and Baltimore City may levy additional income taxes ranging from 1.25% to 3.20% of taxable income.
SOCIAL SECURITY
Social Security benefits are not taxed.
EXEMPTIONS FOR OTHER RETIREMENT INCOME
Railroad Retirement income is not taxed. 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 $26,300 under certain conditions. Distributions from 401(k), 403(b) and 457 plans can qualify for the pension exclusion. Out-of-state government pensions do not qualify for the exemption. If you are a retired member of the military, you may be able to subtract up to $5,000 of your military pension from your federal AGI.
PROPERTY TAXES
Assessments are based on the fair market value of property. Property-tax rates vary widely. No restrictions or limitations on property taxes are imposed by the state, so cities and counties can set tax rates at the level they deem necessary to fund government services. These rates can increase, decrease or remain the same from year to year.
The Homeowners' Property Tax Credit Program allows credits against the homeowner's property-tax bill if the property taxes exceed a fixed percentage of the person's gross income.
Tax breaks for seniors: A property-tax deferral program allows property owners 65 or older to defer the increase in their property-tax bill. Local governments must approve the program. The deferred taxes become a lien on the property and must be repaid when the property is transferred.
A Renters' Tax Credit program provides up to $750 a year for those age 60 and older or 100% disabled.
INHERITANCE AND ESTATE TAXES
Maryland collects an inheritance tax. Property passing to a spouse, child or other lineal descendant, spouse of a child or other lineal descendant, parent, grandparent or sibling is exempt from taxation. Property passing to other individuals is subject to a 10% tax.
Maryland estate tax is imposed on estates exceeding $1 million. The maximum tax rate is 16%.
Visit RetirementLiving.com for a complete rundown of taxes in Maryland.
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