2018 General Assembly Income Tax Legislative Activity by Richard Strombotne

Maryland Tax Code vs Federal Tax Cut Bill

Dick Strombotne, 2/16/18

At the February 9 monthly membership meeting of Chapter 258 I asked the attendees who itemized deductions on their Maryland income tax returns. Almost every hand went up. These members may find themselves facing increased Maryland income taxes for 2018 in the range of $1,500. Why? Because the federal tax cut bill increases the standard deduction significantly;$12.000 for single filers, $18,000 for heads of household, and $24,000 for joint filers and surviving spouses. Many Maryland taxpayers who previously itemized deductions will file federal returns to get the benefits of the higher standard deductions, but if so they can no longer itemize deductions on their Maryland return. They could only claim the small MD standard deductions; maxima of $2,000 for single filers and $4,000 for joint filers.

Two possible solutions to the problem.

One approach is increase the standard deduction for Maryland taxes. Sen. Serafini (R- Dist 2) has introduced SB 318 to increase the standard deduction to $7,500 for single filers and $10,000 for joint filers. The companion bill is HB 1190, introduced by Del. Buckel (R – Dist 1B). If approved, this change to the MD tax code could significantly reduce the increase in state and local income taxes faced by Maryland taxpayers who previously itemized their taxes.

A second approach is to permit taxpayers to claim itemized deductions whether or not they claimed the standard deduction on their federal form. Sen. Serafini has introduced SB 191 for this purpose. The companion bill is HB 589, introduced by Del. Krebs (R – Dist 5). The Hogan Administration introduced a bill (SB 733/HB 875) following this approach in the week of Feb 5. It is titled “Protecting Maryland Taxpayers Act of 2018.” .

Hearings will be held for these bills in the next few weeks. The House Ways and Means Committee will hear the Krebs bill (HB 589) to permit itemized deductions on February 21 at 1.00 pm and will hear the Buckel bill (HB 1190) to increase the standard deduction on February 28 at 1:00 pm. It will hear additional bills on itemized deductions on March 7, including Del. Kaiser’s bill HB 1336. On February 21, the Senate Budget and Taxation Committee will hold hearings on both bills from Senator Serafini, SB 318 (increase standard deduction) and SB191 (permit itemized deductions) on February 21 at 1:00 pm. It is impossible to know ahead of time what the General assembly will do. Both of these approaches will benefit many Maryland taxpayers.

What to do?

If the federal tax cut bill will result in an increase in your Maryland state and local income taxes my advice is that you immediately call your state senator and three delegates and let them know what you think about these bills. It is easy to do. Just call the toll free General Assembly number at 1-800-492-7122, ask to be connected to your legislator, and give your opinion to the staff person who answers. (If you don’t know who your legislators are Google on “find my elected officials”.) Call immediately even if the hearings on the bills have been held. Your calls will be timely until there are final decisions.