The Maryland Senate (on Tuesday) and the House (on Wednesday) passed a tax increase on individuals reporting income of more than $100,000 and joint filers reporting income of more than $150,000 in Maryland. The Governor is expected to sign the bill into law soon.
The increase is retroactive to January 1, 2012, and Maryland will issue new withholding tables in the coming weeks. The increase is a quarter of a percentage point (.25%) in tax on those higher-income earners. The tax increase does not affect local (county) taxes, just the state tax. Maryland local tax rates range from 1.25% to 3.2%.
Currently, Maryland has graduated tax rates ranging from 2% to 5.5% depending on income level. This legislation increases rates at the top end and compresses the tax brackets so that single filers will see a rate increase to 5% for income between $100,001 and $125,000, 5.25% for income between $125,001 and $150,000, 5.5% for income between $150,001 and $250,000, and 5.75% for incomes above $250,000.
Joint filers will pay similarly higher rates, starting at 5% for those above $150,000 and maxing out at 5.75% on income above $300,000. The legislation also phases out Maryland’s personal exemption for higher-income filers.
This tax increase separates Maryland tax rates (when combined with local income taxes) even more from Virginia, which is graduated but very quickly tops out at 5.75% for those earning more than $17,000 per year. The District of Columbia income tax rates top out at 8.5% for those earning more than $40,000. Maryland’s state plus local tax rate in some counties could reach as high as 8.95%.
If you have questions regarding how this tax change may impact your personal tax liability, a Bond Beebe tax professional can consult with you or help prepare a tax projection in order to gauge the impact.