Here are some of the most important changes and benefits affecting the approximately 3.5 million taxpayers working on their 2016 Maryland income tax returns.
Opening of the 2017 Tax Filing Season
Maryland will begin processing personal income tax returns for Tax Year 2016 on January 23, 2017, the same day the Internal Revenue Service (IRS) begins accepting returns. Note: If the IRS experiences delays, these delays will postpone our opening date.
We plan to begin processing business returns on January 6, 2017. No returns will be processed before the start-up dates, even if sent prior to that date. The Comptroller's Office recommends filing electronically to ensure returns are received and processed quickly.
Claiming Business Income Tax Credits
Legislation mandates the Form 500CR must be filed electronically. Not all tax software supports electronic filing of Forms 500CR or 502CR. Be sure to use a Comprehensive Software vendor which you can find on our website at: Individual Tax Software and Business Tax Software.
Beginning with Tax Year 2015 certain individual taxpayers may elect to claim the Community Investment Tax Credit and/or the Endow Maryland Tax Credit on Maryland Form 502CR, and thus avoid the electronic filing requirement. Read instructions to Form 502CR to see if you qualify for this election.
Personal income tax returns are due by April 18, 2017.
Business income tax return dates vary. See Filing Extensions and Deadlines for Corporations
Maryland recognizes Emancipation Day as a legal holiday. Returns with a due date of April 15, will be due the next business day.
Local Taxpayer Service Offices
Taxpayer Service Offices will be open from 8:30 a.m. to 4:30 p.m., Monday through Friday to help taxpayers fill out and electronically file Maryland income tax forms for free. Please bring any W-2 statements or other withholding statements, such as 1099s, that you have, along with your completed federal income tax return.
New Tax Rates
- Local Tax Rate Changes - For tax year 2016, Anne Arundel County has decreased its rate to 2.50% and Worcester County has increased its rate to 1.75%. Please note the changes on 2016 Form 502D. For tax year 2017, Calvert County has increased its rate to 3.00% and Somerset County has increased its rate to 3.2%. Please note the changes on 2017 Form 502D.
Note: Since the Special Nonresident Tax Rate is tied to the lowest local rate, the Special Nonresident Tax Rate increased to 1.75% for 2016.
Exemptions and Deductions
There have been no changes affecting personal exemptions on the Maryland returns.
Personal Exemption Amount - The exemption amount of $3,200 begins to be phased out if your federal adjusted gross income is more than $100,000 ($150,000 for joint taxpayers). The $3,200 exemption is phased out entirely when the income exceeds $150,000 ($200,000 for joint taxpayers). See Instruction 10 in the Resident tax booklet for the reduced amounts, or review the page, Determine Your Personal Income Tax Exemptions. The additional exemption of $1,000 remains the same for age and blindness.
Dependent Form 502B - will be required to be attached to Form 502, Form 505 and Form 515 to determine what exemptions you are entitled to claim.
Itemized Deduction Limitation - The State of Maryland continues to recognize the federal itemized deduction limitation threshold (Pease Limitation). This means that a taxpayer will reduce the federal itemized deductions used on the Maryland return only when the federal adjusted gross income is high enough for the federal itemized deductions to be reduced or limited on federal Form 1040, Schedule A.
If a taxpayer with high income is subject to limitations on itemized deductions, and has taken a state income tax deduction, the taxpayer will need to use the revised itemized deduction worksheet (Resident Worksheet 14A or Nonresident Worksheet 16A) to reflect the amount of state income tax deductions that were limited on the Maryland return.
Tax Forms, Instructions & Booklets
The resident tax booklets contain both the tax forms and the instructions for each major form. The tax forms on the Web site are available separately from the resident and nonresident instruction booklets.
All of our tax forms have been reformatted to ensure enhanced readability when paper forms are filed. This new format has increased the number of pages of some of the tax returns. Make sure that you attach all pages of your return to ensure that your return is processed correctly.
Maryland Individual Tax Credit Form 502CR has been removed from the resident tax booklet, but is available to be downloaded from our Web site.
- Tax Forms and Instructions Online - Tax forms and instructions for Individual and Business taxpayers are available here online at Maryland Tax Forms and Instructions.
- Tax Booklets at Post Offices - The Comptroller's Office no longer supplies local post offices with tax booklets.
- Tax Booklets at Libraries - We have provided a limited supply of tax booklets to a number of libraries throughout the State that have requested them.
- Tax Booklets at Comptroller's Taxpayer Service Offices - Tax booklets are available at all of our 12 local taxpayer service offices.
- Request a Tax Booklet - Taxpayers may request a resident or nonresident tax booklet by calling (410) 260-7951, or by e-mail at email@example.com.
Increased pension exclusion - Maryland's maximum pension exclusion, which is available to qualifying taxpayers who are age 65 or older; are totally and permanently disabled; or have a spouse who is totally and permanently disabled, increased from $29,200 to $29,400 for tax year 2016.
Subtraction modification updates for tax year 2016:
- Increase to the existing Honorable Louis L. Goldstein Volunteer Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program maximum amount from $4,000 to $4,250. Note: the increase of this subtraction does not apply to volunteer reserve and auxiliary police officers. They are entitled to a maximum subtraction of $3,500.
- The mileage rate for certain qualifying charitable use of a car on Form 502V has decreased from 57.5 cents to 54 cents.
- The subtraction modification for the amount of qualified principal residence indebtedness included in federal adjusted gross income that was allowable as an exclusion under the Mortgage Relief Act of 2007, as amended is no longer available as a subtraction modification.
- Now any individual contributing funds to a Maryland College Investment Plan or Broker-Dealer College Investment Plan qualifies for a subtraction modification. Previously, only individuals designated account holders of these plans qualified for this subtraction modification.
- A new subtraction modification is available for any amount included in federal adjusted gross income as a result of a distribution to a designated beneficiary from a Maryland ABLE account, unless it is a refund or nonqualified distribution.
- A new subtraction modification is available for up to $2,500 per ABLE account contributor per beneficiary of the total of all amounts contributed under the Maryland ABLE Program.
- A new subtraction modification is available for up to $5,000 of income earned by a law enforcement officer residing in the Maryland political subdivision in which the officer is employed if the crime rate in that political subdivision exceeds the State’s crime rate. Law enforcement officer means an individual who in an official capacity is authorized by law to make arrests, and is a member of a Maryland law enforcement agency, including an officer who serves in a probationary status or at the pleasure of the appointing authority of a county or municipal corporation. Federal law enforcement officers do not qualify.
Individual Taxpayer Changes
- New Payment Voucher – Form IND PV: Resident returns filed with a payment by check or money order are now submitted with a Form IND PV. The Form IND PV is a payment voucher. See the Form IND PV for more information.
- Form EL102: The Form EL102 has been discontinued for tax year 2016. See the information above related to the new payment voucher, Form IND PV.
- New Return Address for Form 502 or Form 505 filed with payment by check or money order:
Comptroller of Maryland
PO Box 8888
Annapolis, MD 21401-8888
Form 502 or Form 505 filed without payment by check or money order
are submitted to:
Comptroller of Maryland
Revenue Administration Division
110 Carroll Street
Annapolis, Maryland 21411-0001
- New Political Subdivision Fields (REQUIRED): There are new required fields to be completed on page 1 of the Form 502 based upon the physical address of a taxpayer as of December 31, 2016 or last day of the taxable year. See Instruction 6 in the Resident Instruction Booklet for more information.
- New Retirement Income Form – Form 502R: The Maryland General Assembly enacted House Bill 1148 in the 2016 Session requiring the collection of information detailing the amount of retirement income reported by an individual and/or their spouse by source. The Form 502R is required to be filed by any resident individual who: 1) reported income from a pension, annuity, or individual retirement annuity (IRA) on a federal return; 2) received any income during the year from Social Security or Railroad Retirement (Tier I or Tier II); OR 3) claimed a pension exclusion on line 10 of the 2016 Form 502. See Form 502R for more information.
- Interest Rate Decrease: The annual interest rate decreases from 13% per annum to 12% per annum on January 1, 2017. The annual interest rate changes again on January 1, 2018. Interest is due at a rate of 12% annually or 1.00% per month for any month or part of a month that a tax is paid after the original due date of the 2016 return but before January 1, 2018.
- Heritage Structure Rehabilitation Tax Credit: The Sustainable Communities Tax Credit is now the Heritage Structure Rehabilitation Tax Credit. The requirements related to the Heritage Structure Rehabilitation Tax Credit may be found on the Form 502S.
- Updated Form 502CR, Part E: Reflects a maximum credit of $390 for the payment of Long-Term Care Insurance Premiums for a resident age 40 or younger for whom this credit has never been claimed.
- New income tax credits on Form 502CR for preceptors: New tax credits are available for certain licensed physicians and nurse practitioners who served as preceptors in areas with health care workforce shortages. The credits are available on Part J of Form 502CR
- Refundable earned income tax credit (REIC): The REIC increases each year through 2018 when it reaches 28% of the federal EIC. For 2016, the REIC amount for eligible residents is 26%.
- 502D mailing address update: Please mail the form 502D to: Comptroller of Maryland, Revenue Administration Division, 110 Carroll Street, Annapolis, MD 21411.
- Form 502DEP: In a continuing effort to protect sensitive taxpayer information, the Comptroller’s Office will no longer mail the Declaration of Estimated Personal Income Tax Packet (Form 502DEP coupons). To file your personal estimated tax payments, we encourage you to file electronically using the Comptroller’s iFile system. Taxpayers who choose not to file electronically may submit payment by printing and mailing the Form 502D.
- Many state revenue agencies, including Maryland, are requesting additional information this filing season in an effort to combat stolen-identity tax fraud and to protect you and your tax refund. If you and your spouse have a driver's license or state issued identification card, please provide the requested information from it. The return will not be rejected if you do not provide a driver's license or state-issued identification. If you provide this information, it may help to identify you as the taxpayer.
Business Taxpayer Changes
New business tax credits: There are two new business tax credits available, the Aerospace, Electronics, or Defense Contract Tax Credit and the Preservation and Conservation Easements Tax Credit. See Parts W and X of Instructions to Form 500CR for more information.
Reminder about Electronic Format: For tax years beginning after December 31, 2012, the paper version of Maryland Form 500CR Business Income Tax Credits is no longer available. You must file your Maryland return electronically to claim the business income credits available from Form 500CR. See Instructions to Form 500CR.
Beginning with Tax Year 2015, certain individual taxpayers may elect to claim the Community Investment Tax Credit and/or the Endow Maryland Tax Credit on Maryland Form 502CR, and thus avoid the electronic filing requirement. Read Instructions to Form 500CR to see if you qualify for this election.
Form 500 and Form 510: must be filed electronically to claim a business income tax credit from Form 500CR or a Heritage Structure Rehabilitation Tax Credit from Form 502S.
Changes to business tax credits:
- Cybersecurity Investment Incentive Tax Credit: The $250,000 cap on this credit has been increased to $500,000 for investments in Maryland Cybersecurity Companies located in Allegany County, Dorchester County, Garrett County, or Somerset County. This credit is now 50%, rather than 33%, of an investment in a Maryland Cybersecurity Companies located in these counties.
- Biotechnology Investment Incentive Tax Credit: The $250,000 cap on this credit has been increased to $500,000 for an investment in a Qualified Maryland Biotechnology Company located in Allegany County, Dorchester County, Garrett County, or Somerset County. The credit is 75%, rather than 50%, of an investment in a Maryland Biotechnology Company located in these counties.
- Commuter Tax Credit: The credit is now the lesser of 50% of providing commuter benefits or $100 per month for each employee. Previously, the credit was the lesser of 50% of providing commuter benefits or $50 per month for each employee. Also, the number of required passengers in a qualifying vanpool vehicle has decreased from 8 adults to 6 adults.
- Clean Energy Incentive Tax Credit: Facilities that produce electricity from a qualified energy resource co-fired with coal no longer qualify for this credit
Tax Professional Changes
The Comptroller of Maryland designates e-File Software Vendors’ Maryland products as either Basic or Comprehensive. This applies to both business and individual income tax software packages.
The Basic designation is used for simple returns. Software packages designated as Comprehensive support all electronic forms, including Form 500CR, Amended Returns and the transmission of binary attachments (PDFs).
This process is designed to help taxpayers and tax professionals determine which software will best fit their needs. Please see the latest updated list of approved eFile software vendors for individuals and businesses.
The new Maryland Power of Attorney Forms are now available.
The Form EL101 has been enhanced and redesigned to facilitate the use of electronic signatures of taxpayers and tax preparers. The Form EL101 is available here.
Fiduciary Tax Changes
New business tax credits: There are two new business tax credits available, the Electronics, or Defense Contract Tax Credit and the Preservation and Conservation Easements Tax Credit. See Parts W and X of Instructions to Form 504CR for more information.