**Maryland is one of only four states that regulates paid tax preparers.

Earned Income Tax Credit^

Income Tax Rate: 2-6.25 percent¹

State EITC: Yes

Refundable EITC Rate: 25.5 percent of the federal EITC, rising to 26 percent January 1, 2016, 27 percent January 1, 2017 and 28 percent January 1, 2018

Non-Refundable EITC Rate: 50 percent of the federal EITC²

Year enacted: 1987

Expanded: Maryland’s EITC (a refundable credit) was created in 1998 and increased in 2007 with the refundable credit increasing from 20 to 25 percent and expanded eligibility to include filers without qualifying children.

Notes/News: Filers must choose whether to file for the refundable or non-refundable credit. They may not file for both.³

In February, 2014, HB0198 was introduced in the House and companion legislation SB0727 was introduced in the Senate to increase the Maryland Refundable Earned Income Tax Credit from 25 percent of the federal credit to 30 percent, phasing the increase in over a five year period. In March 2014, the House voted 134-0 to pass House Bill 198, to increase the state refundable earned income tax credit from 25 percent to 28 percent of the federal allowance over four years. On April 7, 2014 the Maryland Senate passed HB198, and the governor signed it in to law on May 5, 2014.

Montgomery County, a large suburban county neighboring the District of Columbia, enacted a refundable EITC in 1999, called the Working Families Income Supplement, to help offset the high cost of living for a large number of low-income working families in the jurisdiction. Eligible families that filed for the EITC receive a county credit equal to the state’s refundable credit. ⁴ For budget reasons, the county EITC refund was reduced to  72.5 percent of the state EITC in 2011,  68.9 percent in 2012, and 75.5 percent in 2013. In 2011 Maryland also passed a law, HB 632, that requires the state Comptroller to prepare and mail to all employers in the State a specified notice; requiring an employer to provide specified notification to an employee who may be eligible for the State earned income tax credit.

In 2013, the County Executive recommended funding the county EITC at 80 percent of the state EITC in 2014 and a bill was introduced to gradually restore it to the full 100 percent and require a supermajority for any proposals to reduce it again. But he also asked the County Council to trim its budget additions, which may have jeopardized the proposal to fully restore the EITC. On May 23, 2013, the Montgomery County Council unanimously approved a budget for FY 2014 that increased the Working Families Income Supplement from 75.5 percent to 85 percent of the state’s EITC.

On October 21, Bill 8-13, to restore the Working Families Income Supplement to a full 100 percent of the state’s EITC, cleared a County Council Committee. On October 29, the full council unanimously passed the bill, which restored the County Credit to a full match for the state credit by Fiscal Year 2016.

In 2015, Montgomery County found last minute funding and increased their local EITC to 100% of the state credit.

Reports/Materials: Bursting the Bubble, The Challenges of Working and Living in the National Capital Region, The Commonwealth Institute, DC Fiscal Policy Institute, Maryland Center on Economic Policy, June 2014

In Support of SB727 to Increase the State Earned Income Credit, Advocates for Children & Youth, February 2014

Maryland Policy Report: How Can Maryland Help the Working Poor?, Thomas A. Firey, The Maryland Public Policy Institute, February 2014

Comments on Working Families Income Supplement by Montgomery County Councilmember Hans Riemer, October 2013

Montgomery County Poised to Expand Its Exemplary EITC, Citizens for Tax Justice, August 2013

Chris Mai Testimony: The Working Families Income Supplement Provides Numerous Benefits to Low-Income Families, Chris Mai, Center on Budget and Policy Priorities, July 2013

Working Families Income Supplement Testimony, Camille Henry, former credit recipient, July 2013

Testimony to the Montgomery County Council on the Working Families Income Supplement, Debbie Stein, July 2013

Testimony to the Montgomery County Council on the Working Families Income Supplement, Maryland CASH Campaign, July 2013

Maryland State & Local Taxes, from Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, Institute on Taxation and Economic Policy, January 2013

Testimony of Phil Oliff, policy analyst, before the Maryland House Ways and Means Committee, Center on Budget and Policy Priorities, February 2012

Maryland: State and Local Taxes in 2007, Institute on Taxation and Economic Policy, November 2009

Articles/Letters/Op-Eds: Officials Tout Tax Credit For Poor: Forum aims to educate taxpayers, Alan Brody, Southern Maryland Newspapers Online, February 26, 2010

Child Tax Credit^

State Credit: No

Child and Dependent Care Tax Credit^

State Credit: Yes, deduction and tax credit

Refundable: No

Deduction Eligibility: All filers with eligible child or dependent care expenses are eligible for deduction of some or all child care expenses from their taxable income.

Deduction Formula: All filers may subtract up to $3,000 dollars of actual child care expenses from their taxable income. Filers with two or more children may subtract another $3,000 of actual child care expenses from their taxable income.⁵

Tax Credit Eligibility: Individuals with income up to $25,000 and joint filers with income up to $50,000 are eligible for the credit.⁶

Tax Credit Formula: For filers with income under $41,000, the tax credit rate is 32.5 percent of the federal child and dependent care tax credit. For filers whose income exceeds $41,001 the tax credit rate decreases by 3.25 percent for each additional $1,000 of income until income reaches $50,000.⁷ Filers earning more than $50,001 receive no tax credit.⁸

Notes/News Income limits for tax credit vary depending on filing status. The above numbers are for a married couple filing jointly. Individual filers use a similar schedule with income levels reduced by 50 percent.

Property Tax Circuit Breaker^

Circuit Breaker: Yes

Eligibility: All low-income homeowners and some low-income renters

Homeowner Credit Eligibility Restrictions: Household income must be less than $60,000. The credit applies to the first $300,000 of the property’s assessed value.

Homeowner Credit Formula: Property taxes are capped using a graduated formula. The circuit breaker credit is equal to the property tax amount subtracted from the tax cap amount. The tax cap is calculated by adding 0 percent of the first $8,000 of the homeowner’s income, 4 percent of the next $4,000, 6.5 percent of the next $4,000, and 9 percent of remaining income up to $60,000.⁹

Renter Eligibility Restrictions: Eligibility divided into two classes:

1) Filers over 60, filers who are 100 percent disabled, and surviving spouses of otherwise eligible filers are eligible for a credit calculated based on total income and monthly rent. If utilities are included in rent, the Department of Assessments and Taxation estimates utilities costs and adjusts the calculation accordingly.

2) Filers under 60 with at least one dependent minor living with them and household income below the federal poverty threshold are also eligible. ^{10 11}

Renter Credit Formula: Propertytaxes are capped using a graduated formula. The credit is equal to 15 percent of rent paid¹² subtracted from the tax cap amount. The renter tax cap is calculated differently from the homeowner’s tax cap. The renter’s tax cap is calculated by adding 0 percent of the first $4,000 of the renter’s income, 2.5 percent for the next $4,000, 5.5 percent for the next $4,000, 7.5 percent of the next $4,000 and 9 percent of remaining income.¹³

Local Tax Credits: Many jurisdictions provide supplemental property tax credits. Residents of Anne Arundel, Baltimore, Calvert, Caroline, Carroll, Charles, Frederick, Garrett, Harford, Howard, Kent, Montgomery, Prince George’s and Washington counties may be eligible. Residents in the cities of Gaithersburg, Rockville, College Park, Greenbelt and Hyattsville may be eligible for further credits through their municipal government.¹⁴

Notes/News: In 2008, a bill was introduced that would have modified the calculation formula for the Homeowners Property Tax Credit and expanded the Renters Property Tax Credit¹⁵. The bill would have lowered the Homeowners circuit breaker trigger from 6.5-9 percent to 5 percent on taxpayers earning more than $12,000.

The same bill proposed doubling the maximum income of filers from 100 to 200 percent of the federal poverty level and would have removed the dependent minor requirement. Circuit Breaker calculations would be brought in line with those of the Homeowners program. The maximum credit available would double. Under the proposed new formula, over 99.9% of recipients would have seen an increase in their credit.

The bill had a scheduled hearing in the House Budget and Taxation committee. The hearing was canceled and the bill died in committee.

Reports/Materials: Options for Protecting Maryland’s Low- and Moderate-Income Families, Nicholas Johnson and Jason A. Levitis, Center on Budget and Policy Priorities, October 26, 2007

From Regressive Tax Increases, Center on Budget and Policy Priorities, October 26, 2007