Maryland Tax Tip Brochures - Income Tax Tips

The local income tax, which is collected on the state income tax form as a convenience for local governments, is calculated as a percentage of your taxable income. For more information, see Local Tax Rates or Tax Tip #53, Figuring Maryland's local income tax.

Can I pay my tax with a credit card?

Yes. You can pay your Maryland tax due amount with a credit card, using MasterCard, Discover, American Express or VISA. For more information, see Paying Maryland Taxes with a Credit Card or Instruction 24 in your Maryland tax booklet.

Can I pay my tax by direct debit?

You can pay your Maryland tax due amount by direct debit, if you file electronically. For more information, see Pay with Direct Debit If you already have an existing tax liability, you may be able to pay online, using our Direct Pay service.

Is there a tax break if both spouses have income?

Yes, you can claim the two-income married couple subtraction on line 16 of Maryland Form 502. This is a state-only deduction that reduces your taxable income. Married couples filing a joint return, when both have taxable income, may subtract up to $1,200 or the income of the spouse with the lower income, whichever is less. A worksheet is included in Instruction 13 to help you calculate the subtraction.

What about child care costs?

You can claim two separate tax breaks for child or dependent care costs on your Maryland return. The first benefit is a state tax deduction (or subtraction) which reduces your taxable income. If you have eligible child or dependent care expenses, first determine your federal tax credit by completing the calculation on either federal Form 2441 or Schedule 2 of federal Form 1040A. Transfer the amount of child or dependent care expenses (not the federal tax credit) claimed on the federal form to line 9 of Maryland Form 502. You can subtract actual expenses up to the legal maximums of $3,000 for one child or $6,000 for two or more children.

What about the other state benefit for child care?

If you were eligible for the federal tax credit for child and dependent care, you may be entitled to a credit on your Maryland state income tax return, using Form 502CR. The credit starts at 32.5 percent of the federal credit allowed, but is phased out for taxpayers with federal adjusted gross incomes above $41,000 ($20,500 for individual who are married, but file separate income tax returns). No credit is allowed for individuals whose federal adjusted gross income exceeds $50,000 ($25,000 for married filing separately). This credit does not affect the treatment or eligibility of the state deduction for child care costs.

What is the earned income credit?

It's a special tax break available on both the federal and Maryland income tax returns for taxpayers who work and earn up to a certain amount of income. On your Maryland return, you can claim an earned income credit equal to 50 percent of the federal earned income credit.

Who is eligible for the Maryland earned income credit?

You must be a worker who is eligible for the federal credit and whose earned and adjusted gross income for tax year 2007 is:

Less than $12,590 ($14,590 for married filing jointly) with no children and 25-64 years of age.
Less than $33,241 ($35,241 for married filing jointly) and you maintained a home for a child for at least six months of the year.
Less than $37,783 ($39,783 for married filing jointly) with two or more children.

How do I claim the earned income credit?

Start with your federal return. Find the federal earned income credit you claimed on line 66a of federal Form 1040, line 41a of federal Form 1040A or line 8 of federal Form 1040EZ. Enter one-half of that amount on line 25 of Maryland Form 502 or line 7a of Form 503.

Can I get a refundable earned income credit even if I'm not required to file a Maryland return?

Yes. If one-half of your federal income credit is greater than your Maryland tax and you have one or more dependents you could claim as exemptions on your federal return, you may be eligible for a cash benefit from the state. Complete the worksheet provided in Instruction 21 of the Maryland tax booklet. Enter the result on line 43 of Form 502 or line 18 of Form 503.

Who's eligible for Maryland's poverty level credit?

Taxpayers whose earned income and federal adjusted gross income are less than the poverty level income for the number of exemptions claimed on their federal return may be eligible for a special credit on Maryland Form 502 or Form 503.

How can I tell I'm eligible?

If you checked filing status 6 on your Maryland return, you are not eligible. If you checked any other filing status, complete line 1 of Maryland Form 502 or 503. Next, complete the worksheet provided in Instruction 18 of the state tax booklet instructions to see if you are eligible.

How do I claim the benefit?

If you completed the worksheet and qualify for the poverty level credit, enter the amount from line 5 of the worksheet on line 26 of Form 502 or line 7b of Form 503.