Income Tax - Subtraction Modification - Retirement Income
If enacted, this bill will substantially alter state tax laws by broadening the categories of retirement income that can be excluded from taxation. Specifically, starting from taxable years beginning after December 31, 2021, the bill introduces a tiered subtraction modification for retirement income, progressively increasing the percentage they can exclude from their taxable income. In 2022, individuals could subtract 30%, in 2023, 60%, and ultimately, by 2024 and onwards, 100% of their total income from qualified retirement plans, thereby providing significant tax relief for retirees and disabled individuals.
House Bill 499 proposes modifications to the Maryland income tax concerning retirement income. The bill allows individuals aged 65 and older, those who are totally disabled, or those whose spouses are disabled, to subtract a greater amount of their retirement income from their taxable income. This change aims to provide financial relief and incentives for retired individuals and disabled persons, allowing them to keep more of their income for personal use. The bill also seeks to repeal certain limitations on the maximum amounts eligible for this subtraction modification, effectively increasing the financial benefits for qualifying residents.
The discussions surrounding HB 499 have highlighted a few notable points of contention. Supporters advocate for the bill as a necessary measure to assist senior citizens and disabled individuals, particularly focusing on the financial challenges faced by these demographics. However, critics express concerns about the potential impact this increase in tax modifications could have on state revenue. Questions arise regarding the sustainability of such tax breaks and their implications on public services funded through state taxes, indicating that a more balanced approach may be needed to ensure both support for vulnerable populations and the financial health of state programs.