Overlooked Maryland Deductions

Written By Terrell Hartley

Maryland taxpayers routinely miss out on valuable deductions and credits that could slash their tax bills. Here’s the no-nonsense guide to what you’re probably overlooking — and how to fix it.
Byline: Terrell Hartley, EA — Leather Mae Tax Services
Updated: September 7, 2025

Highlights

  • Maryland has unique deductions and credits that differ from federal rules; many taxpayers miss these.

  • Commonly overlooked deductions include the Maryland Earned Income Tax Credit, pension exclusions, and first-time homebuyer savings.

  • Recent law changes raised the standard deduction but introduced itemized deduction phase-outs for high earners.

  • Local counties like Baltimore City and Baltimore County offer additional property tax credits often ignored.

  • Proper documentation and timely filing are critical to claim these deductions and avoid audits.

The Lede (Nut Graf)

If you’re filing your Maryland return and thinking “I just claimed the federal stuff, so I’m good,” think again. Maryland’s tax code has its own quirks and perks — and many taxpayers, especially in Baltimore and surrounding counties, are leaving serious cash on the table. Overlooking these deductions isn’t just sloppy; it’s costly. This guide cuts through the noise to spotlight the deductions Marylanders routinely miss, how the law has changed for 2024-2025, and what you need to do to claim what’s yours.

What Changed ?

Maryland’s tax system diverges from federal rules in key ways. For tax years starting after December 31, 2024, Maryland switched to a flat standard deduction ($3,350 single, $6,700 married) but introduced a 7.5% phase-out on itemized deductions for high earners (AGI over $300,000 for most filers). Plus, a new 2% capital gains surtax hits those with AGI above $350,000. These changes mean some deductions are harder to claim, while others remain underutilized due to lack of awareness or confusion about Maryland-specific rules (https://www.gfrlaw.com/what-we-do/insights/maryland-tax-alert-2025) (https://www.gma-cpa.com/blog/navigating-marylands-new-tax-law-changes-your-questions-answered).

Who This Hits in Maryland (With Examples)

  • Baltimore W-2 employee who doesn’t realize Maryland excludes Social Security income and offers a pension exclusion.

  • Prince George’s County rideshare driver missing out on the Maryland Earned Income Tax Credit (EITC) and home office deductions.

  • Annapolis S-Corp owner unaware of local enterprise zone credits and the new itemized deduction phase-out.

  • Retired Marylander in Howard County not claiming the pension and military retirement income subtractions.

  • First-time homebuyer in Montgomery County neglecting the homebuyer savings account subtraction.

The Law, Plainly (Cited)

Strategies You Can Use (Ranked)

  1. Claim the Maryland Earned Income Tax Credit (EITC)
    If you qualify for the federal EITC, claim Maryland’s refundable credit worth up to 50% of the federal amount. Many low- to moderate-income workers miss this, especially gig workers and part-timers

    (https://www.marylandtaxes.gov/individual/income/tax-tip-11.php).

  1. Use the Pension and Retirement Income Exclusion
    Maryland excludes up to $39,500 of pension and retirement income for seniors and disabled taxpayers. Social Security benefits are also excluded. Don’t forget to subtract these on your Maryland return even if they’re taxable federally

    (https://blog.turbotax.intuit.com/income-tax-by-state/maryland-105400/).

  1. Maximize the First-Time Homebuyer Savings Account Subtraction
    Save up to $5,000 annually (lifetime max $50,000) in a dedicated account for your first home purchase and subtract the interest and earnings from your Maryland taxable income

    (https://blog.turbotax.intuit.com/income-tax-by-state/maryland-105400/).

  1. Itemize Carefully and Watch the Phase-Out
    If your federal AGI exceeds $300,000 ($200,000 MFS), your Maryland itemized deductions get reduced by 7.5% of the excess. Calculate carefully to decide if the Maryland standard deduction is better

    (https://www.gma-cpa.com/blog/navigating-marylands-new-tax-law-changes-your-questions-answered).

  1. Check Local Property Tax Credits
    Baltimore City, Baltimore County, and Anne Arundel County offer property tax credits for energy-efficient home improvements, historic preservation, and public safety personnel. These don’t show up on your state return but reduce your local tax bill

    (https://finance.baltimorecity.gov/public-info/credits)

    (https://www.baltimorecountymd.gov/departments/budfin/taxpayer-services/tax-credits).

  1. Don’t Forget Military Income Subtractions
    Active-duty military stationed overseas can subtract up to $15,000 of military pay earned outside the U.S. if total military pay doesn’t exceed $30,000

    (https://blog.turbotax.intuit.com/income-tax-by-state/maryland-105400/).

Documentation & Audit-Proofing

  • Keep detailed records: pay stubs, pension statements, 1099s, and receipts for homebuyer savings accounts.

  • Maintain logs for home office or business expenses.

  • Retain documentation for local property tax credit applications.

  • Maryland Tax Court cases emphasize substantiation; no sloppy paperwork allowed

    (https://mdcourts.gov/taxcourt).

If You Got a Letter/Notice

  • Don’t panic. Read the notice carefully and note deadlines.

  • Gather all relevant documents: returns, W-2s, 1099s, deduction substantiation.

  • Respond in writing by the deadline; don’t ignore it.

  • Consider professional help if the notice involves complex deductions or large amounts.

  • Use the Comptroller’s website to verify the notice and get contact info

    (https://www.marylandtaxes.gov/individuals/tax-services.html).

Common Questions (Fast Answers)

  • Q: Can I claim both Maryland and federal standard deductions?
    A: No. You choose one per return. Maryland’s is much lower but may be better if you don’t itemize federally.

  • Q: Is my Social Security income taxable in Maryland?
    A: No. Maryland excludes Social Security benefits from taxable income.

  • Q: How do I know if I qualify for the Maryland EITC?
    A: If you qualify for the federal EITC, you likely qualify for Maryland’s, which is 50% of the federal amount.

  • Q: Are local property tax credits automatic?
    A: No. You must apply separately with your county or city tax office.

  • Q: What if I missed claiming a deduction last year?
    A: You can file an amended Maryland return within three years to claim missed deductions.

Pull Quote (your voice): If you’re not digging into Maryland’s unique deductions, you’re basically handing the state a free loan.

Table: Key Numbers Maryland Taxpayers Ask About

Item2025 ValueSourceMaryland Standard Deduction (Single)$3,350 Maryland Comptroller

Maryland Standard Deduction (Married)$6,700 Maryland Comptroller

Pension Exclusion Limit$39,500 TurboTax Maryland Guide

Maryland EITC Percentage50% of Federal EITC Maryland Tax Tip

Itemized Deduction Phase-Out Threshold$300,000 AGI (most filers)GMA CPA

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Sources (Direct Links Only)

Need help? Terrell Hartley, Enrolled Agent — Leather Mae Tax Services
Website: https://www.LeatherMaeTaxServices.com • Phone: 443-800-5283
Appointments: https://calendar.app.google/eYnWaEmFcnP2qSt8A
We take integrity seriously.

Terrell Hartley

Enrolled Agent, 13 year tax pro, Working from Maryland

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