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Maryland State Taxes

 

Maryland State Taxes

Staff Reports
by Staff Reports


Maryland State Tax ? Individual Income Tax

Maryland’s individual income tax was first adopted in 1937. Today it is administered by the Comptroller’s Office in graduated rates, starting at 2% on the first $1,000 of taxable income with a maximum of 6.25% on incomes exceeding $1 million.

In general, you must file a Maryland tax return if any of the following apply:

  • You are or were a Maryland resident
  • You are required to file a federal tax return
  • Your Maryland gross income equals or exceeds the amounts listed below

You must file a Maryland tax return if your Maryland gross income equals or exceeds the following amounts (for your filing status):

  • Single (under 65) ? $9,350
  • Single (65 or older) ? $10,750
  • Head of Household (under 65) ? $12,000
  • Head of Household (65 or older) ? $13,400
  • Married Filing Jointly (both under 65) ? $18,700
  • Married Filing Jointly (one spouse 65 or older) ? $19,800
  • Married Filing Jointly (both 65 or older) ? $20,900
  • Married Filing Separately (all, regardless of age) ? $3,650
  • Qualifying Widow/Widower (under 65) ? $15,050
  • Qualifying Widow/Widower (65 or older) ? $16,150
  • Dependent Taxpayer (single person claimed as a dependent on the federal return of another) ? $9,350

Maryland income tax rates (for taxpayers filing as single, married filing separately, dependent taxpayer, or fiduciary):

  • 2% on taxable income of $1,000 or less
  • $20 plus 3% on taxable income over $1,000 and up to $2,000
  • $50 plus 4% on taxable income over $2,000 and up to $3,000
  • $90 plus 4.75% on taxable income over $3,000 and up to $150,000
  • $7,072.50 plus 5% on taxable income over $150,000 and up to $300,000
  • $14,572.50 plus $5.25% on taxable income over $300,000 and up to $500,000
  • $25,072.50 plus 5.5% on taxable income over $500,000 and up to $1,000,000
  • $52,572.50 plus 6.25% on taxable income over $1,000,000

Maryland income tax rates (for taxpayers filing as head of household, married filing jointly, or qualifying widow/widower):

  • 2% on taxable income of $1,000 or less
  • $20 plus 3% on taxable income over $1,000 and up to $2,000
  • $50 plus 4% on taxable income over $2,000 and up to $3,000
  • $90 plus 4.75% on taxable income over $3,000 and up to $200,000
  • $9,447.50 plus 5% on taxable income over $200,000 and up to $350,000
  • $16,947.50 plus 5.25% on taxable income over $350,000 and up to $500,000
  • $24,822.50 plus 5.5% on taxable income over $500,000 and up to $1,000,000
  • $52,322.50 plus 6.25% on taxable income over $1,000,000

Maryland has 23 counties and 1 independent city. Each of these 24 jurisdictions levies a local income tax ? which is collected on the state tax return as a convenience for local governments. The local income tax is calculated as a percentage of your taxable income. It is based on where you live (not where you work) and the rates range from 1.25% to 3.20%.

Maryland tax returns are due by April 15th following the end of the tax year.

Maryland State Tax ? Corporation Income Tax

The corporation income tax has a rate of 8.25% on Maryland taxable income. To determine Maryland taxable income, a corporation must begin with federal taxable income, minus federal deductions, and plus/minus Maryland modifications. In general, this tax is paid only by C-corporations.

The following types of corporations must file a corporation income tax return:

  • Every Maryland corporation, even if the corporation is inactive or has no taxable income to report
  • Every corporation that is subject to Maryland income tax law and has income/losses attributable to sources within Maryland
  • Corporations operating in Maryland and in one or more other states, if their Maryland activity exceeds the provisions for federal protection from state taxation
  • Financial institutions (with special apportionment rules)

Corporation income tax returns (Form 500) are due by the 15th day of the fourth month following the end of the taxable year, or by the original due date of the federal return.

Maryland State Tax ? Sales & Use Tax

First established in 1947, this tax is made up of two major components: the sales tax and the use tax. These two parts are complementary, meaning that a transaction is subject to either the sales tax or the use tax, but not both.

The sales and use tax has a rate of 6% for most items, although certain transactions are taxed differently. In general, the sales and use tax is imposed on:

  • The purchase of goods sold in Maryland
  • Certain services (defined as taxable services)
  • The use, storage or consumption in Maryland of tangible personal property purchased outside the state

The “sales tax” applies to the sale of tangible personal property and certain services in Maryland, unless specifically exempted by law. The tax is imposed on the purchase price (a.k.a. taxable price) of goods/services and it is collected from consumers by vendors who are engaged in business in Maryland. The sales tax also applies to the rentals of tangible personal property.

The “use tax” is often referred to as a companion to the sales tax. It applies to tangible personal property purchased outside Maryland and brought into the state for use, storage, or consumption. The use tax is imposed only when sales tax has not been properly collected. This often results from an out-of-state purchases and transactions that take place via Internet, telephone, or mail-order catalog.

Maryland State Tax ? Property Tax

In Maryland, property tax is a major source of local government revenue. Cities and counties use the revenue collected from property taxes to fund local government services (including education, public safety and community services).

Property tax is an “ad valorem” tax, meaning that property is taxed according to value. The Maryland State Department of Assessments and Taxation (SDAT) is responsible for assessing the value of property and enforcing property tax laws. Tax rates are set by each local county/city government depending on their budget.

All real property in Maryland is subject to property tax. Real property tax is imposed by 24 counties (including Baltimore City) and 155 incorporated municipalities (cities) in Maryland.

Property owners receive their property tax bills in July/August of each year.  The property tax bill is determined by two main factors: the property assessment and the tax rate.

  • Assessments are issued by the SDAT based on the property’s fair market value. Property is reassessed every three years.
  • Tax rates are set by each unit of government (the state, counties, and cities) and vary widely across jurisdictions. The State imposes no limitations on tax rates for counties/cities, and rates may change from year to year. Property tax rates are expressed as an amount per $100 of assessed value.

To calculate the amount of property tax due, the property’s assessment is multiplied by the applicable tax rate. Keep in mind that the tax rate is expressed in an amount per $100 of assessed value. The formula for computing real property tax is as follows:

  • Assessed Value ÷ 100 × Tax Rate = Tax Due

Note that the overall tax rate depends on the location of the property ? one piece of property may be subject to state, county, and city tax rates.

If you are unsatisfied with your property assessment, you may make an appeal within 45 days of receiving the notice of assessment. There are three steps to the appeal process:

  • Step 1: Supervisor’s Level ? A property owner may discuss appraised value with an assessor and exchange information. A hearing can be scheduled and a “final notice” will be issued indicating the result of the Supervisor’s Level appeal.
  • Step 2: Property Tax Assessment Appeal Board ? If dissatisfied with the “final notice,” a property owner may make an appeal to the local Property Tax Assessment Appeal Board (PTAAB) within 30 days of the date of the “final notice.” A hearing will be scheduled and a written notice of decision will be issued.
  • Step 3: Maryland Tax Court ? The decision of the Property Tax Assessment Appeal Board may be formally appealed to the Maryland Tax Court (MTC) within 30 days of the date of the decision.  This is the last administrative step in the appeal process ? further appeals must be taken to the Circuit Court.

Maryland State Tax Forms

Form 502 (Maryland Resident Income Tax Return)
Form 503 (Maryland Resident Income Tax Return – Short Form)
Form 505 (Maryland Nonresident Income Tax Return)
Form 515 (Nonresident Local Tax Return)
Form 502E (Maryland Application for Extension to File Personal Income Tax Return)
Form 502D (Maryland Personal Declaration of Estimated Income Tax)
Form 502X (Amended Maryland Tax Return)
Form 502XS (Maryland Short Amended Tax Return)
Form 500 (Maryland Corporation Income Tax Return)
Form ST-118A (Consumer Use Tax Return For Out-of-State Purchases)
Form ST-205 (Sales and Use Tax Refund Application)

Maryland State Tax Resources

Comptroller of Maryland, Spotlight on Maryland Taxes: www.marylandtaxes.com/taxes

Maryland Department of Assessments & Taxation: www.dat.state.md.us

Maryland Circuit Courts Directory: www.courts.state.md.us/circuit/directory

Maryland tax forms and instructions (for individuals):
individuals.marylandtaxes.com/taxforms

Maryland tax forms and instructions (for businesses): business.marylandtaxes.com/taxforms

The “Maryland Sales and Use Tax Rate Chart:” business.marylandtaxes.com/taxinfo/salesanduse/tax_rate_chart

Visit the “Online Services for Businesses” center: business.marylandtaxes.com/onlineservices

Eligibility requirements for Maryland “iFile” free online filing: individuals.marylandtaxes.com/filinginfo/requirements

Maryland “iFile” Internet tax filing system:  interactive.marylandtaxes.com/Individuals/iFile

Check the status of your state tax refund online: interactive.marylandtaxes.com/INDIV/refundstatus