Largest Tax Cut Package in Maryland History – What It Means For You

On Friday, Governor Larry Hogan signed into law the largest tax cut package in state history. It includes relief for retirees, working families, and small businesses. It should be noted that this is a 5-year relief package starting in 2023 and ending in 2027.  The $1.86 billion relief package, however, when combined with the recent $100 million gas tax suspension will deliver nearly $2 billion in tax relief to state residents.

WHAT DOES IT INCLUDE?

The new legislation includes the following tax relief opportunities to leverage for each identified group:

• RETIREES:
  • The Retirement Tax Elimination Act provides a $1,000 tax credit for people age 65 and older, who make $100,000 or less or a $1,750 credit for couples over age 65 earning $150,000 or less. These are “nonrefundable” credits so if the tax before the credit is less than the maximum credit the credit will be reduced. Those earning more than the thresholds will not be entitled to any credit. This retirement tax credit is by far the largest part of the tax cut package. According to the governor, 80% of retirees in Maryland will be impacted by the plan, which could save them around a combined $1.55 billion.

• SMALL BUSINESS:
  • The Work Opportunity Tax Credit incentivizes employers and businesses to hire and retain workers from underserved communities that have faced significant barriers to employment. ($195 million). This long-standing federal program gives up to $9,600 for hiring a worker who faced a barrier to employment, including being a veteran, an ex-felon, on public food-assistance programs or unemployed for a long time. The new Maryland program boosts that incentive by 50 percent, adding another $4,800 in state cash for each qualified worker.

• WORKING FAMILIES:
  • Family Budget Boosters: sales tax exemptions for childcare products such as diapers, car seats, and baby bottles, and critical health products such as dental hygiene products, diabetic care products, and medical devices. ($115.6 million). It lowers the out-of-pocket expenses for those items by 6 percent, which advocates say would make a meaningful difference to cash-strapped families as inflation grows.

Legislative leaders have negotiated for weeks on how to spend the unprecedented $7.5 billion surplus caused by unexpected economic growth, particularly among the state’s wealthy, and an infusion of federal stimulus money. As such the bipartisan agreement also makes a one-time record $800 million investment in the Blueprint for Maryland’s Future while maintaining a record level in the state’s “Rainy Day” Fund. It uses the surplus to make strategic and historic investments that:

• Support public safety and victims of crime;
• Ensure Maryland’s world-class health system by supporting hospitals, nursing homes, and assisted living facilities;
• Expand Medicaid dental coverage for adults, in-home medical care, and autism services;
• Help families by expanding access to childcare, providing bonuses for public school staff, and increasing student aid at higher education institutions;
• Spur local economies and job opportunities through capital funds for school construction, affordable rental housing, state facility maintenance, and local transportation infrastructure;
• Protect against the growing threat of cyber attacks.

WHAT DOES IT MEAN FOR ME?

The legislation will provide significant relief to many Marylanders and working families dealing with inflation and higher prices and help create more jobs.

HOW KATZABOSCH CAN HELP

The tax professionals at KatzAbosch can help minimize the tax burden and provide crucial information on an ongoing basis to assist in retirement planning or with business operations. For questions as to how this update affects your situation, or for any other tax matter, please contact your KatzAbosch representative or contact us today.