Income Tax – Subtraction Modification – Military Retirement (Tax Relief for Military Retirees Act of 2022)
The bill sets a new precedent for tax relief by phasing in a complete exemption for military retirement income over several years. For taxable years beginning after December 31, 2021, and before January 1, 2023, military retirees would be able to exempt the greater of $15,000 or 50% of their military retirement income from state income tax. Following this phase, starting after December 31, 2022, all military retirement income would be exempt from taxation. This change is expected to encourage more veterans to settle in Maryland, providing a boost to the local economy while supporting those who served the nation.
House Bill 1440, titled the 'Tax Relief for Military Retirees Act of 2022', focuses on modifying the Maryland income tax treatment of military retirement income. The proposed legislation aims to provide more favorable tax treatment by altering limits on subtraction modifications for military retirement income, thereby reducing the tax burden for military retirees. Specifically, the bill proposes adjustments for taxable years that would significantly increase the amount of military retirement income eligible for subtraction from Maryland's adjusted gross income, moving towards a more comprehensive relief framework for service members.
While the bill is largely seen as beneficial for military retirees, it may raise concerns regarding the short-term impact on state revenue. Opponents might argue that such a tax relief could lead to a budgetary shortfall, compromising funding for other essential services. Proponents, however, contend that the long-term economic benefits derived from attracting military retirees can offset any immediate losses in tax revenue. The discussions surrounding the bill reflect a broader debate on how best to support veterans and the financial implications for the state's fiscal health.