Maryland Governor Proposes Major Tax Cut for Retirees

Gov. Hogan hopes $1 billion in additional tax relief will make it more affordable for retirees to stay in Maryland.

(Image credit: 2017)

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.

Subscribe to Kiplinger’s Personal Finance

Be a smarter, better informed investor.

Save up to 74%

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.

Sign up

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.

Rocky Mengle
Senior Tax Editor,

Rocky was a Senior Tax Editor for Kiplinger from October 2018 to January 2023. He has more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, he worked for Wolters Kluwer Tax & Accounting and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky has a law degree from the University of Connecticut and a B.A. in History from Salisbury University.