On Friday, April 1, 2022, Governor Larry Hogan signed one of the largest tax cut packages in Maryland history into law, providing $1.86 billion in aid for retired individuals, small businesses, and working families. The decision comes after negotiations by Maryland legislators on how best to invest the state’s $7.5 billion economic surplus.
“This agreement will deliver on our promise to provide real, long-term relief for hard-working Marylanders dealing with inflation and higher prices, and help create more jobs and more opportunity to continue our strong recovery,” said Governor Hogan during the announcement of the bipartisan agreement.
Here’s what’s included in the new legislation:
Retirement Tax Elimination Act
The Retirement Tax Elimination Act provides $1.55 billion in tax credits for Maryland retirees. Individuals aged 65 or older who earn $100,000 or less in retirement income will receive a tax credit of $1,000, and married couples aged 65 or older who earn $150,000 or less will receive a $1,750 credit. People making above these thresholds will not receive a credit. Governor Hogan reports that the plan will impact about 80% of Maryland retirees, saving them roughly $1.55 billion combined.
Work Opportunity Tax Credit
$195 million is designated to the Work Opportunity Tax Credit (WOTC). The WOTC is a long-standing federal program incentivizing employers to hire and retain workers who have faced significant barriers to gaining employment, such as ex-felons, veterans, and individuals on food-assistance programs.
Formerly, the WOTC offered a maximum credit of $9,600 per qualifying employee. The package increases the WOTC by 50%, adding an extra $4,800 in state funding per qualifying employee, making the maximum credit $14,400 per qualifying employee in Maryland.
Family Budget Boosters
The Family Budget Boosters program includes $115.6 million in sales tax exemptions for qualifying childcare products and health products to help families facing financial burdens due to inflation. Products eligible for the sales tax exemption include diapers, baby bottles, car seats, dental hygiene products, medical devices, and diabetic care products.
If you have any questions about how these tax relief measures will affect you, please contact us.