What's New for the 2021 Tax Filing Season (2020 Tax Year)

Here are some of the most important changes and benefits affecting the approximately 3.5 million taxpayers working on their 2020 Maryland income tax returns.

Note: For forms, visit the 2020 Individual Tax Forms pages.

2020 Individual Income Tax Instruction Booklets

Booklet Title Description
Resident Maryland State and Local Tax Forms and Instructions Instructions for filing personal state and local income taxes for full- or part-year Maryland residents.
Nonresident Maryland Tax Forms for Nonresidents Instructions for filing personal income tax returns for nonresident individuals.
Fiduciary Maryland Instructions for Fiduciaries Instructions for filing fiduciary income tax returns.

Opening of the 2021 Tax Filing Season

The IRS began accepting all Business tax returns on January 8, 2021.

Maryland started accepting all Business tax returns on January 8, 2021.

The IRS will begin accepting all Individual tax returns on February 12, 2021.

Maryland will begin accepting all Individual tax returns on February 12, 2021.

Further information regarding interest or penalty for late payment to be imposed if 2020 tax payments are made after April 15, 2021. Click here for more information.

Further Explanation of Tax Extensions Announced By Comptroller Franchot. Click here.

Claiming Business Income Tax Credits

For tax years beginning after December 31, 2012, you must file your tax return electronically in order to claim a business tax credit unless you submit a waiver from the electronic filing requirement. To request a waiver from filing the Form 500CR electronically, you must submit a completed Form 500CRW Waiver Request For Electronic Filing of Form 500CR and it must be attached to Form 500CR in the filing of your return.

Beginning with Tax Year 2015 certain individual taxpayers may elect to claim the Community Investment Tax Credit and/or the Endow Maryland Tax Credit on Maryland Form 502CR, and thus avoid the electronic filing requirement. Read instructions to Form 502CR to see if you qualify for this election.

Filing Deadline

Your income tax return is due April 15, 2021.

Business income tax return dates vary. See Filing Extensions and Deadlines for Corporations

Local Taxpayer Service Offices

Taxpayer Service Offices will be open from 8:30 a.m. to 4:30 p.m., Monday through Friday by appointment only. In order to make an appointment at one of our branch offices, please access the appointment scheduler at https://www.marylandtaxes.gov/locations.php. Our branch offices will assist taxpayers to fill out and electronically file Maryland income tax forms for free. Please bring any W-2 statements or other withholding statements, such as 1099s, that you have, along with your completed federal income tax return.

New Tax Rates

  • Local Tax Rate Changes - There are no local tax rate increases for tax year 2021. Click here for a complete list of current city and local tax rates

Exemptions and Deductions

There have been no changes affecting personal exemptions on the Maryland returns.

Personal Exemption Amount - The exemption amount of $3,200 begins to be phased out if your federal adjusted gross income is more than $100,000 ($150,000 for joint taxpayers). The $3,200 exemption is phased out entirely when the income exceeds $150,000 ($200,000 for joint taxpayers). See Instruction 10 in the Resident tax booklet for the reduced amounts, or review the page, Determine Your Personal Income Tax Exemptions. The additional exemption of $1,000 remains the same for age and blindness.

Dependent Form 502B - will be required to be attached to Form 502, Form 505 and Form 515 to determine what exemptions you are entitled to claim. 

Standard Deduction - The tax year 2020 standard deduction is a maximum value of $2,300 for single taxpayers and to $4,650 for head of household, a surviving spouse, and taxpayers filing jointly.

Itemized Deduction Limitation - The State of Maryland follows the new federal tax law treatment to suspend the itemized deduction limitation threshold (Pease Limitation). This means that high-income taxpayers are not required to reduce their itemized deductions using the itemized deduction worksheet used in prior years.

Should I take the standard deduction or itemize? - The federal tax reform of 2017 significantly raised the federal standard deduction. Under current Maryland law, if you take the standard deduction the federal level, you cannot itemize at the Maryland level. You may take the federal standard deduction, while this may reduce your federal tax liability, it may result in an increase to your Maryland income tax liability. The Comptroller's Office encourages you to run your income tax returns under both deduction methods, and to compare the results of taking the standard deduction versus itemizing your deductions, to see which method causes the lowest overall tax liability.

Limitation on deduction for state and local tax - Federal tax reform limited the amount you can deduct for state and local taxes. You cannot claim more than $10,000 ($5,000 for married filing separately) for state and local taxes you paid. The new federal limitation impacts your Maryland return because you must addback the amount of state income taxes you claimed as federal itemized deductions. The addback is limited to $10,000 ($5,000 for married filing separately) and is reported on line 17b of the Maryland Form 502. Maryland will accept any reasonable interpretation of the limitation reported on line 17b. A reasonable interpretation of the law includes the following example: you, a single filer, paid $8,000 in real property taxes and $4,000 in Maryland state income taxes, Maryland will accept an addback of state income tax of $2,000 on Line 17b. In this example, the real estate taxes make up $8,000 of your $10,000 limitation and only $2,000 are required to be added back as state income taxes.

Tax Forms, Instructions & Booklets

The resident tax booklets contain both the tax forms and the instructions for each major form. The tax forms on the Web site are available separately from the resident and nonresident instruction booklets.

All of our tax forms have been reformatted to ensure enhanced readability when paper forms are filed. This format has increased the number of pages of some of the tax returns. Make sure that you attach all pages of your return to ensure that your return is processed correctly. 

  • Tax Forms and Instructions Online - Tax forms and instructions for Individual and Business taxpayers are available here online at Maryland Tax Forms and Instructions (business and individuals). 
  • Tax Booklets at Libraries - We have provided a limited supply of tax booklets to a number of libraries throughout the State that have requested them.
  • Tax Booklets at Comptroller's Taxpayer Service Offices -  Tax booklets are available at all of our local taxpayer service offices.
  • Request a Tax Booklet - Taxpayers may request a resident or nonresident tax booklet by calling (410) 260-7951, or by e-mail at taxforms@marylandtaxes.gov.

Subtractions

Increased pension exclusion - Maryland's maximum pension exclusion, which is available to qualifying taxpayers who are age 65 or older; are totally and permanently disabled; or have a spouse who is totally and permanently disabled, increased to $33,100 for tax year 2020.

Pension exclusion for qualifying retired correctional officer, law enforcement officer or fire, rescue, or emergency services personnel - Pursuant to House Bill 296 (Acts of 2018), the pension exclusion for Retired Law Enforcement Officer or Fire, Rescue, or Emergency Services Personnel has expanded eligibility to include retirement income of correctional officers. Up to a $15,000 subtraction for resident retired law enforcement officers, fire, rescue and emergency personnel who are at least 55 years old and (1) were employed by the State, a political subdivision of the State, or the federal government, and (2) receive pension income related to their above employment. An individual may not claim both this subtraction and the standard pension exclusion.

Subtraction modification updates for tax year 2020:

There were two new subtractions for tax year 2020. However, there have been modifications to a few.

  • Code letter uu. Racing and Community Development Act of 2020 Provides for redevelopment of Pimlico Race Course, Laurel Park, and Bowie Race Course Training Center by allowing a subtraction modification for:
    • The amount of gain recognized as a result of the direct or indirect transfer or conveyance of property located, or used, at or within Laurel Park or Pimlico or any portion of the Bowie Race Course.
    • The amount of income recognized as a result of expenditure of funds directly or indirectly by the State, Baltimore City, of Anne Arundel County. in Pimlico or Laurel Park.
  • Code letter vv. Rental Subsidy Under the Howard County "Live Where You Work" Program.
    • Allows a subtraction modification the amount of a subsidy for rental expenses received by a Howard County resident under the "Live Where You Work" program of the Downtown Columbia Plan.
    • The program will offer rental subsidies for low and moderate-income families who want to live in downtown Columbia so they can be close to their workplace.

Also, there have been modifications to a few.

  • Code letter va. Increase to the existing Honorable Louis L. Goldstein Volunteer Fire, Rescue and Emergency Medical Services Personnel Subtraction Modification Program maximum amount to $6,000.
  • The mileage rate for certain qualifying charitable use of a car on Form 502V has decreased to 57.5 cents.
  • Code letter oo., now includes the Maryland-National Capital Park Police or the Washington Suburban Sanitary Commission Police Force.

Individual Taxpayer Changes

  • The Form 502 includes new language for name matching with individual's social security card to ensure getting proper credit for personal exemptions.d
  • Interest Rate Decrease: Interest is due at the rate of 10% annually or 0.8333% per month for any month or part of a month that a tax is paid after the original due date of the 2020 return but before January 1, 2022. For assistance in calculating interest for tax paid on or after January 1, 2022, click here or visit the Comptroller's website. Enter any interest due on the appropriate line of your tax return.
  • Updated Form 502CR, Part CC, line 7: If you are a Maryland resident and you are the beneficiary of a trust or a Qualified Subchapter S Trust which elected to pay the tax imposed with respect to resident members' distributive or pro rata shares, you may be entitled to a credit for your share of that tax. Or,
  • If you are a Maryland resident and member of a PTE (pass-through entity) which elected to pay the tax imposed with respect to resident members' distributive or pro rata shares, you may be entitled to a credit for your share of that tax paid
  • Many state revenue agencies, including Maryland, are requesting additional information in an effort to combat stolen-identity tax fraud and to protect you and your tax refund. If you and your spouse have a driver's license or state issued identification card, please provide the requested information from it. The return will not be rejected if you do not provide a driver's license or state-issued identification. If you provide this information, it may help to identify you as the taxpayer.

Business Taxpayer Changes

Single Sales Factor Apportionment: For apportioning income to the state for corporate income tax purposes, a single sales factor apportionment formula has been updated for tax year 2020.

Changes to business tax credits

  • The Clean Energy Incentive. The credit has expired for future use however, it has a 5-year carryback provision.
  • Senate Bill 751 (Chapter 643, Acts of 2020) - Apprenticeship Start-Up Act of 2020.
    • Alters the definition of "eligible apprentice" for the purpose of claiming a tax credit for the employment of eligible apprentices.
    • For the first five apprentices claimed, allows a credit of $1,000 for apprentices employed through a youth apprenticeship program. $3,000 for eligible apprentices not employed through a youth apprenticeship program.
    • Allows a credit of $1,000 for apprentices beyond the first five claimed.
    • Limited to a credit of $15,000 for the taxable year per taxpayer.
  • House Bill 0862 (Chapter 633, Acts of 2020) - Historic Revitalization Tax Credit - Transferability (Historic Revitalization Tax Credit Improvement Act of 2020).
    • A separate Act expanded the tax credit to qualified condominiums or cooperative housing projects.
    • This Act expands the credit to make the credit transferable with respect to commercial rehabilitations.
    • Requires the Maryland Historical Trust to promulgate regulations to provide for transferability of this credit.
  • House Bill 980 (Chapter 636, Acts of 2020) - Income Tax - Energy Storage Tax Credit - Alterations.
    • Defines "taxpayer" as the owner of a residential property or commercial property who purchases and installs an energy storage system on the residential or commercial property.
    • An individual or corporation that owns or pays for the installation of an energy storage system that supplies electrical energy intended for use on the residential or commercial property on which the energy storage system is installed.
    • Increases the limit of the tax credit allowed for energy storage systems installed on commercial property to $150,000. The credit is the lesser of $5,000 for residential, $150,000 for commercial, or 30% of the total installed costs.

Tax Professional Changes

Please see the latest updated list of approved eFile software vendors for individuals and businesses.

Click here for more information regarding new business tax credits.