United States

Maryland releases 2017 tax filing season guidance

Provides important changes and reminders for 2016 tax year

TAX ALERT  | 

The Maryland Comptroller has provided a webpage of reminders, changes, links to tax forms and other important information for taxpayers filing their 2016 tax year income tax returns.

According to the announcement, Maryland will begin to process business returns on Jan. 6, 2017 and personal income tax returns on Jan. 23, 2017. Following are highlights from the guidance:

Business tax changes

  • Business income tax credits claimed on Form 500CR must be filed electronically. Maryland taxpayers should consider whether their tax processing software or provider has the capability to file the form electronically. Some individual taxpayers may elect to claim certain credits on Form 502CR and avoid the electronic filing requirement.
  • There are two new business tax credits available: the Aerospace, Electronics, or Defense Contract Tax Credit and the Preservation and Conservation Easement Tax Credit.
  • Changes to existing business tax credits for the 2016 tax year include:

o   Cybersecurity Investment Incentive Tax Credit: The $250,000 cap is increased to $500,000 for investments in Maryland Cybersecurity Companies located in Allegany County, Dorchester County, Garrett County, or Somerset County. The credit increases to 50 percent of an investment in a Maryland Cybersecurity Companies located in these counties.

o   Biotechnology Investment Incentive Tax Credit: The $250,000 cap is increased to $500,000 for an investment in a Qualified Maryland Biotechnology Company located in Allegany County, Dorchester County, Garrett County or Somerset County. The credit increases to 75 percent of an investment in a Maryland Biotechnology Company located in these counties.

o   Commuter Tax Credit: The credit is now the lesser of 50 percent of providing commuter benefits, or $100 per month for each employee. The number of required passengers in a qualifying vanpool vehicle decreases to six adults.

o   Clean Energy Incentive Tax Credit: Facilities that produce electricity from a qualified energy resource co-fired with coal no longer qualify for this credit.

Additionally, Maryland has passed legislation to conform to the new federal C corporation return filing date of April 15 for tax periods beginning after Dec. 31, 2015. Similar conformity legislation has not been passed for partnership filings, thus, the due date for partnership returns remains the fifteenth day of the fourth month following the close of the taxable year.

Individual income tax changes

  • Personal income tax returns are due by April 18, 2017, the next business day after tax returns would normally be due because the state recognizes the District of Columbia’s holiday, Emancipation Day.
  • Local taxpayer service officers will be available to assist taxpayers in completing and filing their income tax returns electronically. Offices will be open during business hours, Monday through Friday.
  • New local personal income tax rates for the 2016 tax year: Anne Arundel County has decreased its rate to 2.50 percent and Worcester County has increased its rate to 1.75 percent. Those changes are included on 2016 Form 502D.
  • New local personal income tax rates for the 2017 tax year: Calvert County has increased its rate to 3.00 percent and Somerset County has increased its rate to 3.2 percent.
  • The Special Nonresident Tax Rate, which is tied to the lowest county rate, is increased to 1.75 percent for the 2016 tax year.
  • Personal exemptions remain the same as the prior tax year. Accordingly, the exemption amount of $3,200 begins to be phased out if your federal adjusted gross income is more than $100,000, or $150,000 for joint taxpayers. The $3,200 exemption is phased out entirely when the income exceeds $150,000, or $200,000 for joint taxpayers.
  • There have been a number of modifications to various subtractions for the 2016 tax year. The impacted modifications include an increased pension exclusion, a new modification for certain law enforcement employees, a new modification for contributions and distributions to and from Maryland’s ABLE program, a modification for certain contributors to a Maryland College Investment Plan of Broker-Dealer College Investment Plan, an elimination of the subtraction modification for the amount of qualified principal residence indebtedness under the Mortgage Relief Act of 2007, mileage rate decrease for charitable use of a car, and an increase to the Honorable Louis L. Goldstein Volunteer Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program.

Maryland taxpayers should carefully review all the changes for the 2017 tax filing season, including a number of additional individual tax administrative changes, and speak to their tax advisors with questions.

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