Maryland State Tax Guide: Essential Updates and Filing Tips

• admin
• February 24, 2025
• 6 min read

Mastering Your Maryland State Tax Return for 2025

Filing your Maryland state tax return can be daunting, especially with the annual changes in tax laws, legislation, and regulations. Whether you’re a long-time resident or new to the state, understanding the latest updates is crucial for accurate and timely filing. This comprehensive tax guide aims to simplify the process, ensuring compliance by providing you with essential information and recent changes for the 2025 tax season.

Key Takeaways

• Filing Deadline: Maryland state tax returns are due by April 15, 2025.
• Income Tax Rates: Recent proposals may affect tax rates for high-income earners.
• Filing Options: Introduction of the free Direct File service for eligible taxpayers.

Understanding Maryland’s Income Tax Rates

Maryland’s income tax structure is progressive, meaning the tax rate increases with higher income levels, based on tax brackets, contributing significantly to the state’s tax revenue and potentially increasing tax burdens alongside state sales tax, estate tax, corporate income tax, and property taxes. As of the latest information, the tax rates are as follows:

For Single, Married Filing Separately, or Dependent Taxpayers:

• 2% on the first $1,000 of taxable income
• 3% on income over $1,000 up to $2,000
• 4% on income over $2,000 up to $3,000
• 4.75% on income over $3,000 up to $100,000
• 5% on income over $100,000 up to $125,000
• 5.25% on income over $125,000 up to $150,000
• 5.5% on income over $150,000 up to $250,000
• 5.75% on income over $250,000

For Married Filing Jointly, Head of Household, or Qualifying Widow(er):

• 2% on the first $1,000 of taxable income
• 3% on income over $1,000 up to $2,000
• 4% on income over $2,000 up to $3,000
• 4.75% on income over $3,000 up to $150,000
• 5% on income over $150,000 up to $175,000
• 5.25% on income over $175,000 up to $225,000
• 5.5% on income over $225,000 up to $300,000
• 5.75% on income over $300,000

In addition to state income taxes, Maryland’s 23 counties and Baltimore City levy local income taxes, which range between 2.25% and 3.20% of your taxable income, in addition to considering any applicable inheritance tax. These local taxes are collected on the state income tax return for your convenience.

2025 Maryland Tax Updates

Maryland tax laws evolve annually, with changes affecting deductions, credits, deadlines, and filing procedures. Here are some important updates for 2025:

Maryland Child Tax Credit Expansion

Starting in 2025, Maryland has expanded its Child Tax Credit to provide additional support for families earning less than $15,000 annually. Eligible taxpayers can claim up to $500 per child under six years old. Imagine the relief for a single parent working tirelessly to make ends meet, now able to afford essential childcare services.

Retirement Income Tax Relief

To help retirees, Maryland continues to implement the “Retirement Tax Reduction Act,” which provides state income tax relief on pension and Social Security benefits. Taxpayers over 65 may qualify for a deduction of up to $50,000 on retirement income. This is a significant relief for seniors who have dedicated their lives to building a secure future.

Clean Energy Tax Incentives

Maryland has increased tax credits for energy-efficient home improvements. Homeowners can claim credits for installing solar panels, energy-efficient HVAC systems, and electric vehicle (EV) charging stations. These incentives not only reduce your tax burden but also contribute to a sustainable future.

Expanded Earned Income Tax Credit (EITC)

Low-to-moderate-income Maryland residents may qualify for an increased Earned Income Tax Credit (EITC). The refundable portion of the credit now covers a higher percentage of federal EITC amounts, providing more financial support to those who need it most.

How to File Your Maryland State Tax Return

For the 2025 tax season, Maryland offers several options to file your state tax return:

1. Direct File: A new, free online tax filing service allowing eligible taxpayers to prepare and electronically file their federal and state tax returns directly with the government. There are no hidden fees or additional charges. Direct File is available to full-time Maryland residents with income primarily from W-2 employment, Social Security benefits, unemployment compensation, interest income, and certain pension and annuity incomes. The service is designed for use on mobile devices and is available in both English and Spanish.
2. iFile: Maryland’s free online filing system allows residents to file their state tax returns electronically. It’s user-friendly and provides instant confirmation upon submission.
3. Professional Tax Preparers: You can choose among a host of professional tax preparers in Maryland who can file your return electronically for you. While the state cannot endorse any specific professional, a list of e-file providers for individuals and businesses is available for your convenience.

Important Dates to Remember

• January 27, 2025: Maryland began accepting individual tax returns.
• April 15, 2025: Deadline to file your Maryland state tax return. If you cannot file by this date, you may request an extension, but any taxes owed are still due by April 15 to avoid penalties.

Common Maryland Tax Deductions & Credits

Taking advantage of state tax deductions and credits can significantly lower your tax bill.

Popular Maryland Tax Deductions

• Standard Deduction: Maryland allows a standard deduction between $1,600 and $2,400 (single) or $3,200 and $4,850 (married/joint filers).
• Student Loan Interest Deduction: Residents who pay student loan interest can deduct up to $2,500.
• Home Mortgage Interest Deduction: Maryland conforms to federal mortgage interest deduction rules.

Tax Credits That Reduce Your Liability

• Earned Income Tax Credit (EITC): Maryland’s state EITC offers up to 50% of the federal credit for low-income workers.
• Homeowners’ Property Tax Credit: Eligible homeowners may receive property tax relief based on income.
• Maryland 529 College Savings Plan Credit: Contributions to Maryland’s 529 education savings plan qualify for a state tax deduction.

FAQs About Maryland State Taxes

What happens if I file my Maryland tax return late?

If you miss the April 15, 2025 deadline, you may face a late filing penalty of up to 25% of the tax due, plus interest charges. Filing for an extension (using Form 502E) gives you until October 15, 2025, but you must still pay any taxes owed by April 15 to avoid penalties.

Do I need to file a Maryland tax return if I live out of state but work in Maryland?

Yes. If you work in Maryland but live in another state, you must file a nonresident Maryland tax return (Form 505). However, Maryland has reciprocity agreements with DC, Virginia, West Virginia, and Pennsylvania, meaning residents of these states are exempt from Maryland state income tax on wages earned in Maryland.

How can I check the status of my Maryland tax refund?

You can check your Maryland tax refund status by visiting the Comptroller of Maryland’s online refund tracker or by calling 1-800-218-816.

Navigating Your Tax Journey with Confidence

Filing your Maryland state tax return correctly and on time ensures that you avoid penalties and take full advantage of deductions and credits. With new tax updates in 2025, including child tax credit expansion, retirement tax relief, and clean energy incentives, Maryland taxpayers have more opportunities to reduce their tax burden. If you’re unsure about any aspect of your return, consider consulting a Maryland tax professional or using state-provided e-filing services to ensure accuracy. Embrace the opportunity to manage your taxes with confidence and make informed decisions that benefit your financial future.