Commentary
Working & the Economy
Commentary: U.S. Tax Laws Have Made Things Worse for Federal Retirees in Md.
Maryland is a high-tax state.
Recent changes in federal tax law have made the tax situation worse:
- At the federal level, the maximum, combined amount of state and local property, income, and sales taxes that can be deducted is now $10,000. In the past, these taxes have generally been fully deductible. However, there has been a substantial increase in the standard deduction: now $12,200 for single taxpayers and $24,400 for married taxpayers. This means that most taxpayers will be better off taking the standard deduction on their federal tax return. Unless they have very substantial charitable and other allowed deductions that would raise their total above the standard deduction, their state and local property and income taxes will yield no tax benefit on their federal income taxes.
- However, Maryland taxpayers who take the standard deduction on their federal tax returns are not allowed to itemize deductions on their Maryland tax returns and will pay more in taxes to Maryland. This represents a de facto tax increase by the State of Maryland and has been accomplished without the Maryland legislature passing any legislation.
- Conclusion: Maryland taxpayers have received a double-whammy at both the federal and state levels.
Especially for seniors
- Maryland is a high-tax state. A tax rate (state plus county) of circa 8% applies to the majority of taxpayers and can be as high as 8.95%.
- Nine states have no income tax.
- Nine other states exempt the total amount of civil service annuities.
- Five additional states exempt certain federal civil service annuities from taxation.
- Seniors receive a relatively minor tax break in Maryland.
- Recent changes in federal tax law have made the tax situation worse for Maryland seniors.
What our legislators need to do
- Legislation is pending in Annapolis that would fix the itemized deduction problem (House Bill 788 and Senate Bill 486) and make retirement income tax free in Maryland for those having an adjusted gross income of less than $100,000 (Senate Bill 278). Please ask your legislators to support these bills.
The bottom line: Maryland taxation is unfair to seniors.
— EDWARD HOLLAND
The writer is public relations director for the National Association of Retired Federal Employees Maryland Federation.
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