April 30, 2018 One of the major tenants of the federal tax reform law passed in late 2017 was a major increase in the federal standard deduction. The federal standard deduction was roughly doubled from $6,000 to $12,000 for individuals and from $12,000 to $24,000 for married couples. Estimates show that roughly 70% of Americans will take advantage of the higher standard deduction starting with tax year 2018. This tax break built into the federal tax law may have unintended consequences at the state level. Under current law, Maryland taxpayers who claim the federal standard deduction are required to take the Maryland standard deduction. Unfortunately, the Maryland standard deduction has not been raised along with the federal standard deduction. This can result in a situation where taking the federal standard deduction saves taxes at the federal level, but costs as much or more at the Maryland level. In situations where a taxpayer’s itemized deductions are close to the federal standard deduction it may make sense to take the lower itemized deductions on the federal tax return in order to have higher itemized deductions on the Maryland tax return. If a taxpayer finds themselves in a situation like this, they should contact their advisor to discuss. To contact a KatzAbosch representative, click here.
