Here are some of the most important changes and benefits affecting the approximately 3.5 million taxpayers working on their 2015 Maryland income tax returns.
Opening of the 2016 Tax Filing Season
Maryland will begin processing personal income tax returns for Tax Year 2015 on January 19, 2016, the same day the Internal Revenue Service (IRS) begins accepting returns. Note: this date has not been confirmed. If the IRS experiences delays, these delays will postpone our opening date.
We plan to begin processing business returns on January 8, 2016. 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, 2016.
Business income tax return dates vary. See Filing Extensions and Deadlines for Corporations
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 that you have, along with your completed federal income tax return.
New Tax Rates
- Local Tax Rate Changes - For tax year 2015, Carroll County has decreased its rate to 3.03%. Please note the changes on 2015 Form 502D. 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.
Note: Since the Special Nonresident Tax Rate is tied to the lowest local rate, the Special Nonresident Tax Rate increases 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 who 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.
The United States Supreme Court has reached a decision in the Wynne case. The Comptroller's Office has provided a list of Frequently Asked Questions for taxpayers. The FAQs will be updated as additional information becomes available. Please check back frequently.
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 $29,000 to $29,200 for tax year 2015.
The new subtraction modifications for tax year 2015 are:
- Taxpayers who have not yet attained the age of 65 are entitled to a subtraction of up to $5,000 of military retirement income; however, taxpayers who are age 65 or over may subtract up to $10,000 of military retirement income.
- Expands the existing Honorable Louis L. Goldstein Volunteer Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program maximum amount from $3,750 to $4,000. Also expands this subtraction to include eligible members of the Maryland Civil Air Patrol. Note: the expansion 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 increased from 56 cents to 57.5 cents.
- Continues a 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. NOTE: The passage of the Tax Increase Prevention Act (TIPA) by the US Congress renders this subtraction unnecessary and invalid for 2014, as this income was excluded on the federal return.
Individual Taxpayer Changes
- Reporting if you have over a certain amount of investment income: If you are a Maryland resident reporting more than $3,400 of investment income on your federal income tax return, check the box on line 1e of Form 502.
- New Line on Form 502CR: Added a new line 31 on Resident Form 502 to allow a claim against the local income tax credit from individual income tax credit Form 502CR.
- Updated income tax credit on Form 502CR for taxes paid to other states and localities: We have revised Form 502CR, Part A to allow a Maryland resident to claim a state and local income tax credit for income taxes paid to other states and localities.
- Updated Form 502CR, Part E: Reflects a maximum credit of $380 for the payment of Long-Term Care Insurance Premiums for a resident , age 40 or younger, for whom this credit has never been claimed.
- Community Investment Tax credit and Endow Maryland Credit have been added to Form 502CR.
- A Contribution Fund from the past returns: The Fair Campaign Financing Fund has returned to the tax return. This fund is now on line 38 of Maryland Resident Form 502, on line 41 of Maryland Nonresident Return Form 505, and online 25 of Maryland Fiduciary Return Form 504.
- Refundable earned income tax credit (REIC): The REIC increase every year through 2018 when it reaches 28% of the federal EIC. For 2015, the REIC amount for eligible residents is 25.5%.
- No earned income tax credits for nonresidents: Beginning with Tax Year 2015, nonresidents may no longer claim an earned income credit(EIC), local EIC or REIC. These credits have been removed from Forms 505, 515, and 505X.
Business Taxpayer Changes
New business tax credits: There is one new business tax credit available. See Instructions to Form 500CR.
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 Sustainable Communities Tax Credit from Form 502S.
New tax credits include:
Changes to business tax credits:
- Maryland Disability Employment Tax Credit for Employees: Employers who hire qualified employees with disabilities are now entitled to a larger tax credit for the first two years of employment. Also, the tax credit for the child care and travel expenses per each qualified employee for each of the first two years of employment has increased to a maximum of $900. See Part C of Form 500CR Instructions for more information.
- Qualified Vehicle Tax Credit: Taxpayers who claim this credit must now attach certification to the electronically-filed return. Maryland registration of a Class F Tractor will serve as certification. See Part G of Form 500CR Instructions for more information.
- Oyster Shell Recycling Tax Credit: The amount of tax credit allowable for each bushel of oyster shells has increased from $1.00 to $5.00 per bushel, not to exceed $750.00. See Part Q of Form 500CR Instructions for more information.
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 list of approved eFile software vendors for individuals and businesses. We will update this page for Tax Year 2015 as we approach the tax season.
We have created a Practitioner’s Nonresident Fiduciary Checklist in an attempt to reduce preparer errors. This checklist has been made part of the Nonresident Fiduciary Form 504NR.
We are also in the process of designing new Maryland Power of Attorney Forms. More information will follow.
Fiduciary Tax Changes
We have substantially reformatted the Maryland Fiduciary income tax return, Form 504:
Previous information requested on page 2 of Form 504 has been moved to the last page of the Form 504 and has been renamed: Form 504, Schedule A.
Electing Small Business Trust (ESBT) income has been moved to line 3 on page 1 of Form 504.
Nonrefundable and refundable tax credits have been separated on the return.
Local Tax and Special Nonresident tax are now on separate lines to facilitate the claiming of tax credits.