Tax laws

Comment: US tax laws have made matters worse for federal retirees in Maryland.

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Maryland is a high tax state.

Recent changes in federal tax law have worsened the tax situation:

  • At the federal level, the maximum combined amount of property, state and local, income, and sales taxes that can be deducted is now $10,000. In the past, these taxes were generally fully deductible. However, there has been a substantial increase in the standard deduction: now $12,200 for single taxpayers and $24,400 for married taxpayers. This means that most taxpayers will benefit from taking the standard deduction on their federal tax return. Unless they have very substantial charitable and other allowable deductions that would raise their total above the standard deduction, their state and local property and income taxes will yield no tax benefit on their federal taxes on Income.
  • However, Maryland taxpayers who take the standard deduction on their federal tax returns are not allowed to itemize the deductions on their Maryland tax returns and will pay more tax in Maryland. This represents a de facto tax increase by the State of Maryland and was accomplished without the Maryland Legislature passing legislation.
  • Conclusion: Taxpayers in Maryland have received a double whammy at the federal and state levels.

Especially for seniors

  • Maryland is a high tax state. A tax rate (state plus county) of approximately 8% applies to the majority of taxpayers and can be as high as 8.95%.
  • Nine states have no income tax.
  • Nine other states exempt the full amount of public service pensions.
  • Five additional states exempt certain federal public service pensions from tax.
  • Seniors receive relatively minor tax relief in Maryland.
  • Recent changes in federal tax law have worsened the tax situation for seniors in Maryland.

What our legislators must do

  • Legislation is underway in Annapolis that would address the issue of itemized deductions (House Bill 788 and Senate Bill 486) and making retirement income tax-exempt in Maryland for those with adjusted gross income below $100,000 (Senate Bill 278). Please ask your legislators to support these bills.

The bottom line: Maryland’s tax system is unfair to seniors.

—EDWARD HOLLAND

The author is director of public relations for the National Association of Retired Federal Employees of the Maryland Conference.