Maryland Retirement Tax Reduction Act of 2022

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Maryland Retirement Tax Reduction Act of 2022

What does Maryland Governor Larry Hogan's announcement today mean for retirees?

In the past year, we have heard about the possibility of raising income taxes, business taxes, capital gains taxes, and taxing unrealized capital gains. But, in the current world where everything is going up in cost, let's talk about our excellent state of Maryland's recently passed retiree state tax REDUCTION. Yes, you read that correctly, reduction. 

Maryland Taxes on Retirement Income

Governor Larry Hogan just passed the largest state tax cut package in our state's history. The bill includes the "Retirement Tax Elimination Act," which will help Maryland retirees enjoy more of their hard-earned money. Marylanders 65 and older making up to $100,000 in retirement income, and married couples making up to $150,000 in retirement income. As a result, 80% of Maryland's retirees will receive substantial relief or pay no state income taxes.

The savings will come from a nonrefundable Maryland tax credit. The credit amount is $1,000 for an individual filer or a couple with only one spouse aged 65 or older. For joint filers both 65 or older, the credit amount is $1,750.

The plan will be phased in over five years, beginning in 2022. However, the law does specify a credit decrease if Maryland’s revenues do not hit set targets in the future.

Maryland Social Security Tax

As before, Social Security benefits remain free from taxation in Maryland. 

Maryland Retiree Pension Exclusion

Maryland did allow a pension exclusion of up to $34,300 in 2022, but this exclusion does take untaxed Social Security benefits into consideration and can be phased out. RCS will examine this bill to determine if this pension exclusion remains in place.

This tax relief could mean a shift in retirement planning for Maryland seniors. Speaking with a financial planner can help retirees figure out how much their retirement savings would be and how best to put those savings to work for them moving forward.

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