Does Maryland Have State Income Tax? When is Maryland Tax-Free Week 2023?

Does Maryland Have State Income Tax? 

Yes, Maryland imposes state income taxes on individuals who are residents or receive income from sources within the state, regardless of residency status. The state's income tax rates vary, spanning from 2% to 5.75%, while the sales tax rate stands at 6%. Maryland provides taxpayers with opportunities to lower their tax obligations through deductions and credits.

These include options such as the standard deduction, itemized deduction, earned income tax credit, credit for child and dependent care expenses, and a deduction for college savings contributions.

When is Maryland Tax-Free Week 2023?

From August 13 to August 19, buyers in Maryland will enjoy a sales tax exemption of 6% on eligible purchases, resulting in savings of $6 for each $100 spent. However, not all products are eligible, and specific guidelines must be adhered to.

For products to qualify, their individual price should not exceed $100. Items surpassing this amount will be subject to the entire sales tax, not just the portion over $100. Sets containing both taxable and tax-exempt items are entirely taxable, regardless of their overall price. Furthermore, only the initial $40 of backpack purchases will be exempt from taxation.

Maryland State Income Tax Rate

In Maryland, a progressive structure governs the individual income tax, featuring a graduated scale spanning from 2.00 percent to 5.75 percent. Additionally, certain local jurisdictions impose their own income taxes. When it comes to corporate income tax, the state enforces a rate of 8.25 percent.

In terms of sales tax, Maryland maintains a state-level rate of 6.00 percent, without any supplementary local sales taxes being imposed. Maryland's taxation framework reflects a nuanced approach, with varying rates depending on the income levels of individuals.

The corporate income tax rate stands at 8.25 percent, while the state's sales tax applies at a rate of 6.00 percent. This streamlined structure eschews additional local sales taxes, ensuring a  uniform tax policy throughout the state.

Maryland State Income Tax 2023

In the fiscal year 2023, Maryland introduces a progressive structure for personal income tax rates. Commencing at 2%, the initial tax rate applies to the initial $1000 of taxable income. Subsequently, rates experience a gradual escalation, culminating at a peak of 5.75%.

This uppermost rate is applicable to incomes surpassing the threshold of $250,000, except for those filing jointly, heads of households, or qualifying widows (er)s, whose ceiling is set at $300,000. To further complexity, Maryland's 23 counties and Baltimore City have the authority to impose their local income tax.

This locally-imposed tax is gathered through the resident state tax return process, offering a streamlined mechanism for local governments to collect revenue. In essence, Maryland's personal income tax landscape embodies a tiered structure that seeks to balance progressive taxation while also accommodating local variations through county-level levies.

Maryland Tax Refund

Checking Your Income Tax Refund Status:

• Online Verification: Stay updated on your income tax refund status by checking online.
• Automated Helpline: Utilize the automated line at (410) 260-7701 or 1-800-218-8160 for quick status updates.
• Prepare Documentation: Have a copy of your filed return on hand to verify the information.
• Email Inquiry: You can also email [email protected] with your name, Social Security number, and refund amount for refund inquiries.

Filing Electronically for Quick Refunds:

• Electronic Filing Advantage: Opt for electronic filing for faster processing and quicker refunds.
• Direct Deposit Option: Choose direct deposit to receive your refund within a few days of acceptance and processing.

Processing Times for Different Filing Methods:

• Electronic Filing: We process electronically filed returns on the same day they're transmitted.
• Professional Tax Preparers: Verify refund status online or contact your preparer if refund check isn't received.
• Paper Filing: Allow around 30 days for paper returns to be processed and logged in our system.

Common Causes of Refund Delays:

• Math Errors: Double-check your calculations to avoid unnecessary delays.
• Missing Entries: Ensure all required sections are accurately filled out.
• Discrepancies in Estimated Taxes: Ensure claimed estimated tax payments match our records.

Considerations for Check Cashing Services:

• Reminder to Check Cashing Vendors: Inform check cashing services that we can't verify refund details over the phone.

Confidentiality of Tax Information:

• Your tax information is confidential, and we're committed to its protection.

What Are the Available Income Tax Deductions for Residents of Maryland?

The available Income Tax Deductions for residents of Maryland:

Standard Deduction:

Maryland provides a standard deduction for taxpayers. For the tax year 2021, the standard deduction is up to $2,350 for single filers and up to $4,700 for those filing jointly, head of household, or qualifying widows/widowers.

Itemized Deductions:

Maryland taxpayers can choose to itemize deductions if they did so on their federal return. However, federal itemization doesn't mandate Maryland itemization.

Child Care Deduction:

Taxpayers with child dependents can deduct child care costs up to $3,000 (or $6,000 for two or more dependents receiving care).

Adoption Expenses Deduction:

Those adopting a child through a public or nonprofit agency can deduct expenses up to $5,000. For children with special needs, this deduction goes up to $6,000.

College Savings Deduction:

Contributors to a Maryland College Investment Plan account can deduct up to $2,500 per beneficiary. The same applies to advanced tuition payments in the Maryland Prepaid College Trust.

Classroom Supplies Deduction:

Full-time K-12 teachers can deduct up to $250 in unreimbursed classroom supplies.

First-Time Homebuyer Savings Deduction:

Contributors to a First-Time Homebuyer Savings Account can deduct up to $5,000 per year, for up to 10 years, or up to $50,000.

Charitable Donation Deduction:

Donations of disposable diapers and personal hygiene products to charitable organizations might be deductible.

Unemployment Compensation Deduction:

Recipients of unemployment compensation from the Maryland Labor Department can deduct it if their federal AGI is within specified limits ($75,000 for individuals, $100,000 for couples filing jointly, heads of household, or surviving spouses).

What Tax Credits Are There in Maryland?

Maryland State Income Tax Credits

Earned Income Tax Credit

• Individuals who have already claimed the EITC on their federal return can also avail of the Maryland Earned Income Tax Credit.
• The federal EITC income threshold varies from $21,430 to $57,414 depending on filing status and the number of children or relative dependents claimed. The highest federal EITC value claimable on the 2021 tax return is $6,728.
• For married couples filing jointly or separately, or those with at least one qualifying child, 50% of the federal credit can be claimed on their Maryland tax return. Single filers, heads of household, or surviving spouses without a qualifying child can claim the entire federal EITC amount.
• If the Maryland EITC surpasses the owed Maryland tax, potential refund eligibility exists.

Child and Dependent Care Credit

• If expenses were incurred to have someone care for a child, dependent, or spouse, eligibility for the child and dependent care credit may apply.
• To claim this credit on a Maryland return, it must have been claimed on the federal tax return. The credit might be refundable if the federal adjusted gross income is $52,100 or below ($78,150 or below for joint filers).

Long-Term Care Insurance Credit

• Individuals who contribute a premium towards a long-term care insurance policy for themselves or a Maryland family member might be qualified for a singular credit on the Maryland tax return.
• For policies covering someone aged 40 or under, the credit is $400, and for policies for individuals over 40, it is $500.

Student Loan Debt Relief Tax Credit

• Borrowers burdened with over $20,000 in student loan debt could be eligible for a refundable tax credit. The credit's utmost value is $5,000. Applicants need to submit for the tax credit through the Maryland Higher Education Commission before September 15 annually.

Maryland Child Tax Credit

• Taxpayers with a federally adjusted gross income of $6,000 or lower can potentially claim a refundable credit of $500 for each qualifying child (typically, dependents under 17 years old).

Renters’ Tax Credit

• Maryland extends a tax credit, of up to $1,000 annually, to renters aged 60 and above or those who are 100% disabled. Certain residents with dependent children might also meet the criteria for this credit. Income limitations apply, and applications for this program must be filed by October each year.

Is It Necessary to Pay Income Tax in Maryland?

If you live in Maryland, whether it's on a full-time or part-time basis, and you're already filing federal income taxes, it's necessary for you to complete a Maryland tax return.

Even if you don't hold residency status but you earned income from a source within Maryland, you'll be required to fill out a nonresident tax return, specifically using forms 505 or 515. Furthermore, it's important to be aware that certain counties impose their own local income taxes, which you might be responsible for paying.