Tax Credits, Deductions and Subtractions for Individual Taxpayers

The Earned Income Tax Credit, also known as Earned Income Credit (EIC), is a benefit for working people with low to moderate income. If you qualify for the federal earned income tax credit and claim it on your federal return, you may be entitled to a Maryland earned income tax credit on the state return equal to 50% of the federal tax credit. The Maryland earned income tax credit (EITC) will either reduce or eliminate the amount of the state and local income tax that you owe.

Detailed EITC guidance for Tax Year 2023, including annual income thresholds can be found here. If you are not certain if you qualify, both the Comptroller of Maryland and the Internal Revenue Service have electronic assistants that can help. By answering questions and providing basic income information, taxpayers can use the IRS EITC Assistant to:

• Find out if you are eligible for EITC;
• Determine if your child or children meet the tests for a qualifying child; and
• Estimate the amount of your credit.

Use the Comptroller of Maryland EITC Assistant to determine if you are eligible for the state Earned Income Tax Credit. The Assistant is available in English or en Español.

The IRS has the EITC Assistant in English version and a Versión en Español.

Clean Energy Tax Incentives for Maryland Residents - 8/12/2024

Beginning in 2022, senior citizens are eligible for a new tax credit, among other benefits they can take advantage of. We have created a convenient tax tip detailing these opportunities. Additionally, seniors should consult our filing guidelines for seniors containing pertinent information and answers to your most frequently asked questions.

A credit is allowed for cost of new aquaculture oyster floats that are designed to grow oysters at or under an individual homeowner's pier. The devices must be buoyant and assist in the growth of oysters for the width of the pier. The credit amount is limited to the lesser of the individual's state tax liability for that year or the maximum allowable credit of $500.

If the credit is more than the tax liability, the unused credit may not be carried forward to another tax year.

To claim the credit, you must complete Part D of Form 502CR and attach to your Maryland income tax return. You must also report the credit on Maryland Form 502, Form 505 or Form 515.

The First-Time Homebuyer Savings Account Subtraction may be claimed on Form 502SU by a Maryland resident who has not owned or purchased, either individually or jointly, a home in the State in the last 7 years and who has contributed money to a first-time homebuyer savings account.

For a period not to exceed 10 years, an account holder may claim a subtraction for up to $5,000 of the amount contributed by the account holder to their account during the taxable year for which the subtraction is claimed plus earnings for the taxable year, up to $50,000 of earnings accrued over the 10-year period. Funds must be used within 15 years following the date the account was established. Any funds in the account for which a subtraction was claimed and not expended on eligible costs by December 31 of the last year following the 15-year period is subject to taxation as ordinary income. Eligible costs are the down payment and allowable closing costs for the purchase of a home in the State by an account holder.

Any account established with a financial institution can qualify as a "first-time homebuyer savings account" so long as the account is established for the sole purpose of paying or reimbursing eligible costs for the purchase of a home by the account holder in the state of Maryland. An account holder may not be the account holder of more than one account.

If the account holder withdraws any funds from the account for which a subtraction has been claimed for a purpose other than eligible costs for the purchase of a home, the funds are considered taxable ordinary income for the tax year in which they were withdrawn and the account holder must pay a penalty equal to 10% of the amount withdrawn. (For information on how to report this addition and penalty, refer to Instructions 12 and 22 in the Maryland Resident tax booklet.) There are three exceptions to this: rollover, bankruptcy, and administrative costs charged by the financial institution.

• Rollover:

  An account holder who withdraws money from the account and, within 60 days, deposits the money in a new first-time homebuyer savings account held by a different financial institution or the same financial institution is not subject to the tax and penalty.

• Bankruptcy:

  A disbursement of any assets of a first-time homebuyer savings account under a filing by an account holder for protection under the United States Bankruptcy Code, 11 U.S.C. §§101—1330, does not subject the account holder to the tax and penalty associated with use of funds for purposes other than eligible costs.

• Administrative Costs:

  A use of the account funds to pay a financial institution’s administrative costs is not considered a withdrawal from the account subject to tax and penalty if the administrative costs are disclosed by the financial institution, in writing, to the account holder at the time the account is opened and do not inure to the benefit of the account holder.

An account holder claiming a subtraction must file a list of transactions for the account during the taxable year with the income tax return on which the subtraction is claimed, and each subsequent year, whether or not the subtraction is claimed in each subsequent year, until the funds are used for eligible costs. Each spouse on a joint return who is the sole account holder of a first-time homebuyer savings account may claim up to the full amount of the subtraction. The amount claimed by each spouse is limited to their contributions to the account on which they are the account holder and earnings on the account on which they are the account holder.

On withdrawal of funds from the account to purchase a home, an account holder must submit to the Comptroller with their income tax return copies of statements provided by the account holder’s financial institution and the settlement statement related to the purchase of the home showing the eligible costs toward which the account funds were applied and a statement of the amount of funds remaining in the account, if any.

If you donated an easement to the Maryland Environmental Trust, the Maryland Agricultural Land Preservation Foundation or the Maryland Department of Natural Resources to preserve open space, natural resources, agriculture, forest land, watersheds, significant ecosystems, view sheds or historic properties, you may be eligible for a tax credit.

You may be eligible for the credit if:

1. the easement is perpetual;
2. the easement is accepted and approved by the Board of Public Works; and
3. the fair market value of the property before and after the conveyance of the easement is substantiated by a certified real estate appraiser.

The credit is equal to the difference in the fair market values of the property reduced by payments received for the easement. The credit amount is limited to the lesser of the individual's state tax liability for that year of the maximum allowable credit of $5,000, per owner, who qualifies to claim the credit. The credit can be claimed on Maryland forms Form 502, Form 504, Form 505 or Form 515.

If the property is owned jointly by more than one individual such as a husband and wife, each individual owner is entitled to the credit based on their percentage of ownership. Individual members of a pass-through entity are not eligible for this credit.

In the case of a joint return, each spouse must calculate their own state tax liability for limitation purposes. Use the rules for filing separate returns in Instruction 8 of the Maryland resident tax booklet. In the case of a fiduciary return, the fiduciary will complete the column for Taxpayer B only.

If the individual's allowable credit amount exceeds the maximum of $5,000, the excess may be carried forward up to 15 years or until fully used. Complete lines 1-7 of Part F on Form 502CR. If you itemize deductions, see Instruction 14 in the Maryland resident tax booklet.

For additional information, contact the Maryland Environmental Trust at 410-514-7900, the Maryland Agricultural Land Preservation Foundation at 410-841-5860, or the Department of Natural Resources at 410-260-8367.

A credit may be allowed for substantial expenditures incurred in a 24-month period to rehabilitate a certified heritage structure located in Maryland. The credit is available for owner-occupied residential property, as well as income-producing property.

For additoinal information, contact the Maryland Environmental Trust at 410-514-7900, the Maryland Agricultural Land Preservation Foundation at 410-841-5860, or the Department of Natural Resources at 410-260-8367.

If you are a qualified teacher, you may be able to claim a credit against your State tax liability for tuition paid to take graduate-level courses required to maintain certification. This credit applies to individuals who:

• Currently hold a standard professional certificate or an advanced professional certificate;
• Are employed by a county/city board of education in Maryland, a state or local correctional facility, or a juvenile correctional facility as listed below in the note;
• Teach in a public school or qualified facility and receive a satisfactory performance;
• Successfully complete the graduate courses with a grade of B or better; and
• Have not been fully reimbursed by the state/county/city for these expenses.

Note: Qualified juvenile facilities are: the Alfred D. Noyes Children's Center; the Baltimore City Juvenile Justice Center; the Charles H. Hickey, Jr. School; the Cheltenham Youth Facility; the J. DeWeese Carter Center; the Lower Eastern Shore Children's Center; the Thomas J.S. Waxter Children's Center; the Victor Cullen Center; the Western Maryland's Children's Center; and the youth centers.

Only the unreimbursed portion qualified for the credit. The courses taken must be required to maintain certification and the cost of the courses must exceed any amount reimbursed by the county or Baltimore City.

The maximum amount of credit allowed is $1,500 for each qualifying individual. The credit is limited to the amount paid, less any reimbursement, up to the maximum allowed credit. See Page 3 of the Instructions for Form 502CR to learn how to calculate the credit. Each spouse that qualifies may claim this credit. Complete a separate column on Form 502CR Part C for each spouse.

The credit can be claimed on Maryland forms 502, Form 505 or Form 515. 

If the credit exceeds your tax liability, the unused credit may not be carried forward to any other tax year.

If you were eligible for a Child and Dependent Care Credit on your federal income tax return, Form 1040 for the tax year, you may be entitled to a credit on your Maryland state income tax return. The credit starts at 32% of the federal credit allowed, but is phased out for taxpayers with federal adjusted gross incomes above $103,650* ($161,100* for individuals who are married filing joint income tax returns). This credit is in addition to the subtraction modification available on the Maryland return for child and dependent care expenses.(See above)

To claim the credit, you must complete Part B of Form 502CR and submit with your Maryland income tax return. You must report the credit on Maryland Form 502, Form 505 or Form 515.

You can use the tables below to determine the percentage of the federal credit that can be claimed on your Maryland return:

• Find the correct decimal amount that applies to your FAGI in the appropriate table.
• Multiply your FAGI by the decimal amount.
• Complete your Maryland return through the line labeled "Maryland Tax."
• Complete Form 502CR, following the instructions provided.
• Submit your completed Form 502CR with your Maryland return.

If the credit is more than your tax liability, and your federal adjusted gross income does not exceed $55,750 ($83,650 for individuals who are married filing jointly), you may be entitled to claim a refund of any excess credit. Refer to Worksheet 21B in the instructions for Form 502CR. Enter any refundable credit in Part CC of Form 502CR.

CREDIT FOR CHILD AND DEPENDENT CARE EXPENSES CHART

Are you a Maryland taxpayer with college loan debt? If so, you are encouraged to apply for the Student Loan Debt Relief Tax Credit for tax year 2024. The deadline to submit your application is September 15, 2024.

Since the program’s introduction in 2017, more than 58 thousand tax credits have been awarded totaling more than $67 million.

The program is administered by the Maryland Higher Education Commission (MHEC) which provides an income tax credit for Maryland residents who are making eligible undergraduate and/or graduate education loan payments.

To be eligible, you must claim Maryland residency for the 2024 tax year, file 2024 Maryland state income taxes, have initially incurred at least $20,000 in undergraduate and/or graduate student loan debt, and have at least $5,000 in outstanding student loan debt at the time of applying for the tax credit.

Those who receive the tax credit will be required to prove they used the full amount of the tax credit for the repayment of their eligible student loans. Otherwise, the recipient will have to return the credit.

To apply, go to the Maryland Higher Education Commission’s website at: https://mhec.maryland.gov/preparing/pages/studentloandebtrelieftaxcredit.aspx

Individuals who hunt and harvest an antlerless deer in compliance with State hunting laws and regulations, and donate the processed meat to a venison donation program administered by a qualified tax exempt organization, may claim a credit against their State personal income tax for up to $50 of qualified expenses to butcher and process an antlerless deer for human consumption. The total amount of the credits may not exceed $200 in any taxable year unless the individual harvested each deer in accordance with a deer management permit.

Any unused portion of the qualified expenses may not be carried over to another taxable year.

To claim the credit, you must complete Part G of Form 502CR and attach to your Maryland income tax return. You must also report the credit on Maryland Form 502, 505 or 515.

An individual may claim a credit against their Maryland State income tax equal to 50% of the qualified expenses incurred during a taxable year to install accessibility and universal visitability features to or within a home.

"Accessibility and universal visitability features" means components of renovation to an existing home that improves access to or within the home for individuals with disabilities. "Qualified expenses" means costs incurred to install accessibility and universal visitability features to or within a home.

For any taxable year, the credit may not exceed the lesser of: (i) $5,000; or (ii) the State income tax imposed for the taxable year calculated before the application of the credits allowed under §§ 10-701, 10-701.1, and 10-741 of the Tax-General Article but after the application of any other credit allowed. The unused amount of the credit may not be carried over to any other taxable year. The credit amount is limited to the lesser of the individual's state tax liability for that year or the maximum allowable credit of $5,000.

The qualified expenses incurred must be certified by the Maryland Department of Housing and Community Development. To claim the credit, an individual shall: (i) file an amended income tax return for the taxable year in which the qualified expenses were incurred; and (ii) attach a copy of the Maryland Department of Housing and Community Development's certification of the approved credit amount to the amended income tax return.

To claim the credit, you must complete Part K of Form 502CR and attach to your Maryland income tax return. You must also report the credit on Maryland Form 502, Form 505 or Form 515.

For more information, contact:

Maryland Department of Housing and Community Development
7800 Harkins Road
Lanham, Md. 20706
301-429-7400
dhcd.maryland.gov/Pages/Contact-Us.aspx
customerservice.dhcd@maryland.gov

If you are a qualified licensed physician or a qualified nurse practitioner who served without compensation as a preceptor, you may be eligible to claim a nonrefundable credit against your State tax liability. There are two credits for qualified preceptors. The first credit on line 1 of Part J on Form 502CR is only available for licensed physicians. The second credit on line 2 of Part J on Form 502CR is available for both licensed physicians and nurse practitioners.

A licensed physician who served as a physician preceptor in a preceptorship program authorized by an accredited medical school in Maryland may claim a credit on line 1 of Part J on Form 502CR in the amount of $1,000 for each student for whom the licensed physician served as a physician preceptor without compensation. For purposes of claiming the credit on line 1 of Part J on Form 502CR, "preceptorship program" means an organized system of clinical experience that, for the purpose of attaining specified learning objectives, pairs an enrolled student of a liaison committee on medical education-accredited medical school in Maryland or an individual in a postgraduate medical training program in Maryland with a licensed physician who meets the qualifications as a preceptor. To qualify for the credit, the licensed physician must have worked in an area of Maryland identified as having a health care workforce shortage by the Maryland Department of Health (MDH). The licensed physician must have worked a minimum of three rotations, each consisting of 160 hours of community-based clinical training. The amount of this credit may not exceed $10,000.

A nurse practitioner or licensed physician who served as a preceptor in a preceptorship program approved by the Maryland Board of Nursing may claim a credit on line 2 of Part J on Form 502CR in the amount of $1,000 for each nurse practitioner student for whom the nurse practitioner or licensed physician served as a preceptor without compensation. For purposes of claiming the credit on line 2 of Part J on Form 502CR, "preceptorship program" means an organized system of clinical experience that, for the purpose of attaining specified learning objectives, pairs a nurse practitioner student enrolled in a nursing education program that is recognized by the Maryland Board of Nursing with a nurse practitioner or licensed physician who meets the qualifications as a preceptor. To qualify for the credit, a nurse practitioner or licensed physician must have worked in an area of Maryland identified as having a health care workforce shortage by the Maryland Department of Health. The nurse practitioner or licensed physician must have worked a minimum of three rotations, each consisting of at least 100 hours of community-based clinical training. The amount of this credit may not exceed $10,000.

A health care practitioner (i.e., a licensed physician, a physician assistant, or a registered nurse practitioner) who served as a preceptor in a preceptorship program approved by the Maryland Department of Health may claim a credit on line 3 in the amount of $1,000 for each physician assistant student rotation for which the health care practitioner served as a physician assistant preceptor without compensation. For purposes of claiming the credit on line 3, "preceptorship program" means an organized system of clinical experience that, for the purpose of attaining specified learning objectives, pairs an enrolled student of a physician assistant program in the State with a health care practitioner who meets the qualifications of a preceptor. To qualify for the credit, a health care practitioner must have worked in an area of Maryland identified as having a health care workforce shortage by the Maryland Department of Health. The health care practitioner must have worked a minimum of three rotations, each consisting of at least 100 hours of community-based clinical training in family medicine, general internal medicine, or general pediatrics. The amount of this credit may not exceed $10,000.

NOTE: A copy of the required certification from the Maryland Department of Health must be included with Form 502CR.

Eligibility for these credits is limited to funds budgeted. Applicants seeking certification will be approved on a first-come, first-served basis. Go to the Maryland Department of Health website at health.maryland.gov for more information.

A taxpayer who makes a donation to a qualified permanent endowment fund at an eligible community foundation may be eligible for a credit against the Maryland State income tax. The taxpayer must apply to the Maryland Department of Housing and Community Development (DHCD) for a certification for the donation. This certification must be attached to the Form 502CR at the time the Maryland income tax return is filed.

Individuals who are eligible to claim the Endow Maryland income tax credit, and who are not PTE members may elect to claim this credit on Part I of Form 502CR, instead of claiming the credit on Form 500CRW. However, an individual may not claim this credit on both Form 500CRW and Form 502CR. PTE members who are eligible for this credit must claim the credit on Business Income Tax Credit Form 500CRW.

Individuals who anticipate having a carryover of the Endow Maryland income tax credit are advised to use Form 500CRW, instead of Form 502CR.

The credit is limited to 25% of the approved donation (in cash or publicly traded securities) not to exceed $50,000.

NOTE: A copy of the required approval from the DHCD must be included with Form 502CR.

This credit is not refundable and is applied only against the Maryland State income tax. To the extent the credit is earned in any year and it exceeds the State income tax, you are entitled to an excess carryover of the credit until it is used, or it expires five years after the credit was earned, whichever comes first.

NOTE: The amount of donation shown on line 2 of Part I on Form 502CR requires an addition to income. See Instruction 12 in the Maryland Resident Instruction Booklet.

For more information contact:
Department of Housing and Community Development
Division of Neighborhood Revitalization
2 N. Charles St., Suite
Baltimore, MD 21202
410-209-5800

Email: endowmaryland.nr@maryland.gov

Donors that make a donation to a qualified permanent endowment fund held at an eligible institution of higher education may be eligible for a credit against the Maryland State income tax. The tax credit terminates December 31, 2028.

To qualify for the credit

Cash donations made by the taxpayer to a qualified permanent endowment fund that meet certain requirements are eligible for tax credits. Donations must be made to a qualifying fund at any of the following institutions: Bowie State University, Coppin State University, Morgan State University, or University of Maryland Eastern Shore. In each tax year, the Comptroller may award a maximum of $60,000 in tax credits to each of the four institutions.

How the credit is calculated

The credit is 25% of the value of a proposed donation to a qualified permanent endowment fund. The donor must apply to the Comptroller of Maryland for a certification of the donation.

Credit application procedure

Donors seeking the tax credit must apply to the Comptroller for a tax credit certificate in the calendar year that the donation is made.

Applications must be sent by e-mail and are approved on a first-come, first-serve basis until the maximum amount of authorized credits have been approved.

HBCU Tax Credit Application will be accepted beginning July 1 of the tax year in which the donation is made.

An acknowledgement letter is issued when an application for the proposed donation is received. Donors are required to submit documentation from the institution showing proof of donation within 30 days before a final tax credit certificate is issued.

Where to send applications

Applications are accepted by e-mail only; and should be sent to HBCUtaxinfo@marylandtaxes.gov

All fields on the application are required to be completed fully. Incomplete applications will not be processed.

How the credit is claimed

Donors claim the credit by including the certification at the time the Maryland income tax return is filed. Individuals that are eligible to claim the income tax credit and are not PTE members may elect to claim the credit using Form 502CR, instead of Form 500CR. However, a donor may not claim the credit on both Form 500CR and Form 502CR. PTE members that are eligible for the credit must claim it on the Business Income Tax Credit Form 500CR. Corporations and Fiduciaries that are eligible to claim the credit must use Form 500CR to do so.

A taxpayer claiming the credit is required to add back the amount of the credit claimed to Maryland adjusted gross income or Maryland modified income, to the extent excluded from federal adjusted gross income.

Contact

Comptroller of Maryland

HBCU Tax Credit Office

HBCUtaxinfo@marylandtaxes.gov

Businesses or individuals who contribute to approved Community Investment Programs may be eligible for a credit against the Maryland State income tax. Contributions must be made to a nonprofit organization approved by the Department of Housing and Community Development (DHCD). The taxpayer must apply to and receive approval by the DHCD for each contribution for which a credit is claimed.

Individuals who are eligible to claim the Community Investment Tax Credit (CITC), and who are not PTE members may elect to claim this credit on Part H of Form 502CR, instead of claiming the credit on Form 500CR. However, an individual may not claim this credit on both Form 500CR and Form 502CR. PTE members who are eligible for this credit must claim the credit on Business Income Tax Credit Form 500CR.

Individuals who anticipate having a carryover of the CITC are advised to use Form 500CR instead of Form 502CR. Individuals who have an existing carryover on their 2017 Form 500CR may elect to use Form 502CR if their Excess Carryover Credit is attributable only to the CITC.

The credit is limited to 50% of the approved contributions (including real property) not to exceed $250,000.

NOTE: A copy of the required approval from the DHCD must be included with Form 502CR.

This credit is not refundable and is applied only against the Maryland State income tax. To the extent the credit is earned in any year and it exceeds the State income tax, you are entitled to an excess carryover of the credit until it is used or it expires five years after the credit was earned, whichever comes first.

For more information contact:
Department of Housing and Community Development
Division of Neighborhood Revitalization
2 N. Charles St., Suite
Baltimore, MD 21202
410-209-5800
citc.nr@mdhousing.org