Say Goodbye to Retirement Taxes: How Maryland’s New Law is Changing the Game for Seniors

April 17, 2023

3–4 minutes

As inflation has risen, Marylanders across the state have seen prices rise on all of life’s necessities.[1] While many have been forced to adapt by picking up extra shifts or a second job, one demographic faces a nearly impossible situation.[2] Retirees are often on fixed incomes, and for those in Maryland still recovering from the effects of the COVID-19 pandemic, the rising prices from inflation continue to burden their fixed incomes.[3] Luckily, many Maryland retirees will receive a reprieve this tax season thanks to the Retirement Tax Elimination Act.[4]

For years, former Maryland Governor Larry Hogan campaigned for tax relief for retirees.[5] Last year, state lawmakers passed a historic budget signed into law by Governor Hogan at the end of his term, which included a large tax relief package. Upon signing the bill, Governor Hogan touted the retiree tax credit as the “largest tax cut in state history.”[6] While this bill was passed last year, with the 2023 tax filing season underway, Maryland residents, especially those 65 or older, should know how the tax relief will benefit them. The Retirement Tax Elimination Act is a non-refundable tax credit designed to offset state income tax for Maryland residents 65 years of age and older.[7] For individuals filing or couples filing jointly with only one person over 65 years old, a $1000 credit will be applied against the state income tax owed.[8] For couples over 65 filing jointly, a $1750 credit will be applied.[9] For retirees in Maryland, this new tax relief is expected to create a $1.55 billion reduction in taxes over the next 5 years.[10] Governor Hogan believed “our seniors deserve to have peace of mind that they can afford to stay right here in Maryland” when signing this bill into law.[11]

While some may believe this new tax relief package for retirees will encourage retirees to stay in Maryland or move into the state, historically, Maryland has ranked among the lowest for its percentage of seniors, with just 15.9% of its citizens 65 years old or older.[12] Maryland also consistently ranks among the top 10 states in cost-of-living rankings.[13] Although lawmakers have given retirees relief from state income tax, Maryland is not likely to become the next Florida in terms of the number of retirees that flee to their state for its financial benefits. This bill is a step in the right direction as lawmakers attempt to ease the financial burdens of this vulnerable population, however, with inflation impacting all Marylanders, more action may be necessary to assist the state’s elder population.

Jacob Linn is a third-year law student at the University of Baltimore School of Law, where he is pursuing his Juris Doctor degree. He previously worked as a Rule 19 student attorney with the Low Income Taxpayer Clinic, where he provided legal assistance to individuals in need of representation in tax disputes. Currently, Jacob serves as the lead law clerk at Strategic Tax Planning, where he assists clients with navigating complex tax laws and regulations. Upon graduation in May 2023, Jacob plans to leverage his experiences at the Low Income Taxpayer Clinic and Strategic Tax Planning to pursue a career in tax law. He is dedicated to using his skills to help individuals and businesses navigate the complexities of tax law and achieve their goals.

[1]Judith Graham, ‘It’s Becoming Too Expensive to Live’: Anxious Older Adults Try to Cope with Limited Budgets, The S. Md. Chronicle (Sept. 10, 2022), https://southernmarylandchronicle.com/2022/09/10/its-becoming-too-expensive-to-live-anxious-older-adults-try-to-cope-with-limited-budgets/.

[2] Brian Witte, Maryland Announces Tax Relief for Many Retirees, Families, Businesses, WBAL 4 (Mar. 29, 2022), https://www.nbcwashington.com/news/local/maryland-announces-tax-relief-for-many-retirees-families-businesses/3010609/.

[3] Graham, supra note 1.

[4] 2022 Md. Laws 4.

[5] Luke Broadwater, Gov. Larry Hogan Again Pitches $1 Billion ‘Aspirational’ Tax Cut for Retirees, The Balt. Sun (Aug. 31, 2018, 1:25 PM), https://www.baltimoresun.com/politics/bs-md-hogan-aspirational-tax-cut-20180830-story.html.

[6] Chandini Shah & Jessica Lopez, Maryland’s Largest Tax Relief Package Could Mean Big Changes for Many, Ellin & Tucker (Aug. 4, 2022), https://www.ellinandtucker.com/insights/marylands-largest-tax-relief-package-could-mean-big-changes-for-many/.

[7] Jim Wilhelm, New 2022 Maryland Tax Relief Legislation Passed, SC&H Group (Apr. 8, 2022), https://www.schgroup.com/resource/blog-post/new-2022-maryland-tax-relief-legislation/.

[8] Id.

[9] Id.

[10] Wilhelm, supra note 7.

[11] David Collins, Lawmakers Could Soon Eliminate State Income Tax for Retirees, WBALTV (Mar. 17, 2022), https://www.wbaltv.com/article/lawmakers-could-soon-eliminate-state-income-tax-for-retirees-maryland/39467801.

[12] Maryland’s Future is Not as a Retirement Community No Matter How Generous the Tax Breaks, The Balt. Sun (Jan. 13, 2022), https://www.baltimoresun.com/opinion/editorial/bs-ed-0114-maryland-retirement-20220113-5fozxazhezhbdo6aoyf3p4cjcu-story.html.

[13] Id.