The State of Maryland has changed the income tax rates and tax rate brackets for individuals as of January 1, 2012. Because these changes were just announced and are retroactive to the beginning of the year, your Maryland state income taxes may be under-withheld for 2012. While the State has established new state income tax withholding tables to increase the withholding on employee wages, these tables were not released until mid-year. 

The Comptroller of Maryland has indicated that the new tables are not designed to make up the withholding of prior months in 2012. Maryland legislation provides that the Comptroller will not assess interest for underpayment of estimated tax for the amount of the increase due to the rate change. You may, therefore, pay the under-withheld amounts when filing your individual tax returns for 2012 without interest due on the balance. 

The Maryland General Assembly has also made changes to exemption amounts for personal income tax. For taxpayers with a federal adjusted gross income of up to $100,000 ($150,000 for joint filers), the exemption amount remains at $3,200. However, as income exceeds these income thresholds, the exemption amounts will drop to $1,600 and $800, accordingly.

Please be aware that the combination of changes to the income tax rates, brackets and personal exemption amounts could impact your 2012 Maryland state income tax liability.

The new tax rates, by income brackets, are:

  • $125,001 to $150,000 will go from 4.75 percent to 5.25 percent
  • $150,001 to $250,000 will go from5 percent to 5.5 percent
  • Incomes above $250,000 to be taxed at 5.75 percent

Joint filers in the higher brackets also will pay more:

  • $150,001 to $175,000 will go from 4.75 percent to 5 percent
  • $175,001 to $225,000 will go from 5 percent to 5.25 percent
  • $225,001 to $300,000 will go from 5 percent to 5.5 percent
  • Incomes above $300,000 to be taxed at 5.75 percent

Our firm can help you determine if you should adjust either your payroll withholdings or quarterly estimated taxes to prevent a surprise balance due next year. Please contact us to arrange a review of your situation.

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