Maryland isn't very tax-friendly for retirees, and many seniors are moving to more tax-friendly states as a result. But Maryland Gov. Larry Hogan wants to change that trend. He recently released a plan to lower income taxes by more than $1 billion for retirees in the state.
Currently, Maryland seniors can exclude up to $31,100 of federally-taxed income from a pension or 401(k) plan (but not from an IRA). There are also income tax exclusions available for the first $15,000 of military pensions and retirement income for certain first responders. However, when you add in local taxes, which can be as high at 3.2%, many Maryland retirees are taxed heavily on income that is not excluded from tax.
Under the governor's plan, there would be no Maryland tax on the first $50,000 of income for retirees with federal adjusted gross income under $100,000. The tax relief would be phased in over a five-year period. According to the governor, his plan would provide tax relief to 230,000 taxpayers and prevent thousands of Maryland retirees from fleeing the state for a more tax-friendly location.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Gov. Hogan also wants to fully exempt all pension and retirement income paid to veterans and first responders.
It's uncertain if the Maryland General Assembly will embrace Gov. Hogan's plan. Maryland Democrats are pushing their own tax reform agenda that would raise up to $2 billion for education reforms. Reaching an agreement on both plans seems unlikely.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
Travel trends you can expect this summerThe Kiplinger Letter Domestic trips will trump foreign travel amid economic uncertainties, though some costs are down.
-
Missouri Leads Capital Gains Tax Repeal: Will Your State Follow?State Tax As one state becomes a test case, policymakers and taxpayers across the U.S. will be watching closely to see what happens next.
-
Here's How the Child Tax Credit Could Increase Under TrumpTax Credits House Republicans released details on President Trump’s ‘one big, beautiful bill,’ including an increased child tax credit.
-
New Overtime Tax Deduction Proposed for Millions Working Extra HoursTax Law Some lawmakers and President Trump want to offer overtime tax relief. But will a tax deduction or an exemption help you most?
-
Big Tax Deduction Increase Proposed for Those Over Age 65Tax Deductions A new bipartisan bill and a tax plan from the House GOP could mean bigger retirement tax savings to offset taxes on Social Security and high prices.
-
New HSA Contribution Limits Are Set for 2026: What to Know NowHealth Savings The IRS says Health Savings Account contribution limits will increase again next year due to inflation.
-
Retirees: Don’t Miss These Valuable State Tax Breaks in 2025Retirement Planning Selecting the right state for retirement can significantly impact your financial well-being.
-
Trump’s Tax Cut Risks Your SNAP, Medicaid BenefitsTax Cuts The GOP budget blueprint could slash lifesaving programs for millions of U.S. households.
-
Missed Tax Day? Nearly One Million Taxpayers Still Can File and Claim Valuable Tax RefundsTax Refunds As many as one million taxpayers could be missing out on a significant tax refund.
