Senior citizens and Maryland income taxes

Should you file a Maryland return?

One benefit many senior citizens enjoy is a higher income allowance before they are required to file a Maryland income tax return. You are required to file a state return only if your gross income exceeds the amount listed in the chart below.

Minimum filing levels for tax year 2007
Taxpayers age 65 or older
Do not include Social Security or Railroad Retirement
income benefits when determining your income level

What is Maryland's state income tax rate?

The top state income tax rate for tax year 2007 is 4.75 percent.

How is the local income tax calculated?

The local income tax is calculated as a percentage of your taxable income. Be sure to use the correct percentage rate for the county in which you live. The percentage rates of all 23 counties and Baltimore City are included in Instruction 19 in the resident Maryland tax booklet, along with a helpful worksheet.

What's important to know about personal exemptions?

The regular personal exemption is $2,400. Senior citizens may be eligible for an extra $1,000 exemption in some cases. If you or your spouse is 65 or older or blind, you are entitled to an extra $1,000 personal exemption, in addition to the regular $2,400 personal exemption. After you complete the exemption box on your form, be sure to enter your total exemption amount on your Maryland return.

What other benefits should senior citizens look for?

Married senior citizens who both receive wages, interest, pension, business or other kinds of income can subtract up to $1,200 or the income of the spouse with the lesser income - whichever is less. A worksheet is included on page 7 of the instructions in the Maryland tax booklet to help two-income couples calculate the correct subtraction amount for their situation.

Does Maryland tax Social Security benefits?

No. Taxpayers affected by the federal tax on Social Security and/or Railroad Retirement benefits can continue to exempt those benefits from state tax. (Maryland tax law exempts from state tax only those Railroad Retirement benefits provided under the U.S. Railroad Retirement Act.) Enter on line 12 of Maryland Form 502 all Railroad Retirement benefits and/or Social Security benefits that were taxable on your federal return and included on line 1 of Maryland Form 502.

Can you claim Maryland's pension exclusion?

Maryland's maximum pension exclusion of $23,600 is available to those taxpayers 65 or older or totally disabled (or whose spouse is disabled) who qualify under the conditions described in Instruction 13 on page 5 of the Maryland tax booklet. Complete the computation for the exclusion on the pension exclusion computation worksheet, which is included on page 5. Be sure to report all benefits received under the Social Security Act and/or Railroad Retirement Act on line 3 of the pension exclusion computation worksheet - not just those benefits you included in your federal adjusted gross income. To receive the benefit of the pension exclusion, be sure to transfer the amount from line 5 of the worksheet to line 11 of your Maryland form, and complete the remainder of your return, following the line-by-line instructions.

Is there a subtraction for military retirees?

If you or the spouse of a military retiree receives military retirement income, you may be able to subtract up to $5,000 of your military retirement income from your federal adjusted gross income before determining your Maryland tax for tax year 2007. To qualify, you must have been a member of an active or reserve component of the U.S. armed forces, a member of he Maryland National Guard, or you must have retired after from active duty with the commissioned corps of the Public Health Service, the National Oceanic and Atmospheric Administration, or the Coast and Geodetic Survey. To claim the benefit, complete Form 502 and follow the instructions included in the resident tax booklet for line 14. Be sure to indicate code letter u on line 14.