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Also of Interest

Maryland

State Income Taxes and Credits


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Most states levy state income taxes, but the tax burden on low-income families varies significantly depending on where they live. A growing number of states offset this burden with state earned income tax credits and/or state child and dependent care tax credits. These credits are typically based on provisions in the federal income tax code, but states make all decisions regarding eligibility and benefit levels.

Federal decisions are italicized.

Income Tax Liability

Tax threshold

Income tax threshold for single-parent family of 31$29,900/year (2007)
Income tax threshold for two-parent family of 41$32,000/year (2007)

Tax burden

Income tax burden for single-parent family of 3 at 100% FPL1$-647/year (2007)
Income tax burden for two-parent family of 4 at 100% FPL1$-434/year (2007)

State Earned Income Tax Credit (EITC)

Income eligibility criteria

Income eligibility rules same as federal EITC2Yes (2008)
Income limit for 1-parent family with 2 or more qualifying children2$38,646/year (2008)3

Benefit level

Refundable credit available2Yes (2008)
Percent of federal EITC225% (2008)4
Max benefit for family with 2 or more qualifying children2$1,206/year (2008)4

State Child and Dependent Care Tax Credit

Income eligibility criteria

Income eligibility rules same as for federal credit5Yes (2007)6
Income limit for family with 2 or more qualifying children5No limit (2007)6

Eligible expenses

Child care expenses eligible by same rules as federal credit7Yes (2007)8

Benefit level

Refundable credit available5No (2007)8
Benefit structure5Deduction of eligible expenses; in addition, for tax filers with income of $50,000/year or less, credit of 3.25-32.5% of federal credit, depending on income (2007)9
Max benefit for family with 2 or more qualifying children5$968/year (2007)10
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Data Notes and Sources

Data on State Income Taxes and Credits were compiled by NCCP in June 2008. Some state policy decisions may have changed since these data were collected.

  1. Calculations include income tax credits that are available to all low-income families in the state, such as state earned income tax credits.
    Jason A. Levitis and Andrew C. Nicholas, The Impact of State Income Taxes on Low-Income Families in 2007, Center on Budget and Policy Priorities, 2008.
  2. State EITC Online Resource Center, http://www.stateeitc.com (accessed June 2, 2008); with additional information from NCCP.
  3. The limit for a two-parent family with one qualifying child is $36,995 per year ($41,646 per year for two or more qualifying children).
  4. Value reflects state's refundable credit; filers may claim either the refundable credit or a nonrefundable credit of 50 percent of the federal EITC, with a maximum value of $1,459/year for a family with one child ($2,412/year with two or more).
  5. Nancy Duff Campbell, Joan Entmacher, Amy K. Matsui, Cristina Martin Firvida, and Christie Love, Making Care Less Taxing: Improving State Child and Dependent Care Tax Provisions, National Women's Law Center, 2006; with updates from National Women's Law Center, 2008 Supplement to Making Care Less Taxing, 2006.
  6. Maryland offers a child care deduction and a child care credit (some filers may claim both). The deduction has no income eligibility limit, but the credit is limited to filers with income of $50,000 per year or less.
  7. These include care expenses for children under 13 years that allowed the claimant to work or look for work, up to a maximum of $3,000 per year for one child and $6,000 per year for two or more children. Claimed expenses may not exceed claimant's earnings, or, in two-parent families, the earnings of the lesser-earning parent; full-time students are treated as having $250 per month in earned income (or $500 per month in families with two or more children).
    Nancy Duff Campbell, Joan Entmacher, Amy K. Matsui, Cristina Martin Firvida, and Christie Love, Making Care Less Taxing: Improving State Child and Dependent Care Tax Provisions, National Women's Law Center, 2006; with updates from National Women's Law Center, 2008 Supplement to Making Care Less Taxing, 2006.
  8. Maryland offers a child care deduction and a child care credit (some tax filers may claim both). Both follow federal rules regarding eligible child care expenses and are nonrefundable.
  9. Tax deductions are subtracted from a claimant's income before calculating taxes, while credits are subtracted from the claimant's tax liability after taxes are calculated. Maryland's top tax rate is 4.75 percent.
  10. Figure reflects the maximum benefit for tax filers claiming both the maximum deduction ($143 per year for one child, $285 per year for two or more) and the max credit ($341 per year for one child, $683 per year for two or more); the benefit cannot exceed the claimant's tax liability.