Here are some of the most important changes and benefits affecting the approximately 3.5 million taxpayers working on their 2014 Maryland income tax returns.
Opening of the 2015 Tax Filing Season
Maryland will begin processing personal income tax returns for Tax Year 2014 on January 20, 2015, the same day the Internal Revenue Service (IRS) begins accepting returns.
Business returns will be processed beginning January 9, 2015. No returns will be processed before the start-up dates, even if sent prior to that date. The Comptrollers 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.
Personal income tax returns are due by April 15, 2015.
Business income tax return dates vary. See Filing Extensions and Deadlines for Corporations
Local Branch Offices
Branch 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 2014, Caroline County has increased its rate to 2.73%, Carroll County has decreased its rate to 3.04%, and Charles County has increased to 3.03%. Please note the changes on 2014 Form 502D. For tax year 2015, Carroll County has decreased its rate to 3.03%. Please note the changes on 2015 Form 502D.
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. We have removed questions relating to health insurance from Form 502B.
Itemized Deduction Limitation - Beginning with Tax Year 2014, the State of Maryland is no longer decoupled with the federal itemized deduction limitation threshold. 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. The itemized deduction worksheet has been revised to reflect this change, and the related addition modification does not apply on the 2014 Maryland return.
However, 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 to reflect the amount of state income tax deductions that were limited.
Tax Forms, Instructions & Booklets
The resident and nonresident tax booklets contain both the tax forms and the instructions for each form. The tax forms on the Web site are available separately from the resident and nonresident instruction booklets.
Beginning with Tax Year 2014, the Resident Short Form 503 has been discontinued. Taxpayers who had previously used Form 503 will use the standard Resident Form 502, or electronically file their Maryland resident return.
- 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 Branch Offices - Tax booklets are available at all of our 12 local branch 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 decided to consider the Wynne case. While the Court is hearing arguments and reviewing the Wynne case, taxpayers should be aware that the statute allows three years to file amended tax returns and taxpayers are advised to speak with a tax professional to determine whether the case affects them. For more information on the Wynne case, please see the information on the Maryland Association of Counties (MACo) website.
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 $27,800 to $29,000 for tax year 2014.
The new subtraction modifications for tax year 2014 are:
- Expands the existing Honorable Louis L. Goldstein Volunteer Police, Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program maximum amount from $3,500 to $3,750.
- Creates a subtraction modification for up to $1,500 of approved unreimbursed expenses that a foster parent incurs on behalf of a foster child.
- Expands the definition of a qualified residing artist deriving income within any Arts & Entertainment District in Maryland. See revised Form 502AE.
- The mileage rate for certain qualifying charitable use of a car on Form 502V has decreased from 56.5 cents to 56 cents.
- Creates a subtraction modification for the amount of student loan indebtedness discharged due to total and permanent disability or death.
- Creates 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 recent passage of the Tax Increase Prevention Act (TIPA) by the US Congress renders this subtraction unnecessary and invalid for 2014, as this income will be excluded on the federal return.
Individual Taxpayer Changes
- Short Form Discontinued: We have discontinued the Short Maryland Resident Return, Form 503. Taxpayers who had previously used this form will now use the standard Maryland Resident Return, Form 502
- Reporting your Federal Capital Gain: Enter on line 1c of Form 502 the amount of capital gains or losses reported as income on line 13 on your federal Form 1040.
- Reporting your Federal amount of taxable pension, IRA, or annuity income: If you are a Maryland Resident reporting an amount of taxable pension, IRA, or annuity income on your federal income tax return, enter this amount on line 1d of your Form 502.
- Reporting if you have over a certain amount of investment income: If you are a Maryland resident reporting more than $3,350 of investment income on your federal income tax return, check the box on line 1e of Form 502.
- Limits on your itemized deductions: Limits on itemized deductions based on your income level may exist on both the federal and Maryland returns. On your 2014 Maryland return you will limit your federal itemized deductions only when those deductions are limited on your federal return. Beginning with the 2014 tax year, Maryland is no longer decoupled from the federal itemized deduction threshold limiting itemized deductions. However, you may need to adjust your state and local tax deductions if your federal itemized deductions are limited. See Instruction 14 for more information.
- New subtraction modifications: There are three new subtraction modifications available. See Instructions 13, or Maryland Resident Subtractions Form 502SU,
- Updated income tax credit on Form 502CR: We have streamlined Form 502CR, Part G to allow the Health Enterprise Zone Practitioner Tax Credit based on the amount of credit certified by the Maryland Department of Health and Mental Hygiene.If you are a qualified “Health Enterprise Zone (HEZ) Practitioner,” you may be able to claim a credit against your state tax liability for income that you earned for practicing health care in a HEZ.This credit must be claimed on an electronically filed amended tax return.
- Attachment Sequence Numbers: We have discontinued placing Attachment Sequence Numbers on our paper resident tax returns.
- Contribution Fund has new name: The “Developmental Disabilities Waiting List Equity Fund” is now the “Developmental Disabilities Services and Support Fund” on line 36 of Maryland Resident Return Form 502.
- iFile: iFile will continue to support resident returns but will no longer support nonresident tax returns.
Business Taxpayer Changes
New business tax credits: There are two new business tax credits 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.
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:
- Qualified Vehicle (Class F Tractor) Tax Credit
- Cybersecurity Investment IncentiveTax Credit
Modified business tax credits:
- Enterprise Zone Tax Credit: Businesses located in Regional Institution Strategic Enterprise (RISE) Zones are permitted to claim the Enterprise Zone Tax Credit.
- Health Enterprise Zone (HEZ) Hiring Tax Credit: Credit eligibility has been expanded to include certain profit and not-for-profit entities which employ qualified employees and provide health care services in a HEZ.
- Electric Vehicle Recharging Equipment Tax Credit: This credit expired on July 1, 2014. Only equipment purchased prior to July 1, 2014, will be certified and eligible for a tax credit on the 2014 Maryland tax return.
Tax exempt organizations which qualify for business tax credits against their withholding tax will now use Form MW508CR to claim the tax credit on Form MW508.
Tax Professional Changes
Effective January 1, 2014, the Comptroller of Maryland began designating e-File Software Vendors’ Maryland products as either Basic or Comprehensive (see Tax Alert). 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 2014 as we approach the tax season.