Tax & Residency Guide in Maryland

### Comprehensive Tax Guide for Maryland

Maryland, located in the Mid-Atlantic region of the United States, has a distinct tax system that residents and businesses must navigate. Understanding the tax laws in Maryland is crucial to ensure compliance and to take advantage of potential deductions and exemptions. In this guide, we will cover the residency triggers, tax system type, treaties, entity options, filing requirements, rates, deductions, when to hire an advisor, and specific strategies for tax planning in Maryland.

#### Residency Triggers:

In Maryland, an individual is considered a resident for tax purposes if they are domiciled in the state or if they maintain a permanent place of abode in Maryland and spend more than 183 days in the state during the tax year. Days spent in Maryland for any part of the day are counted towards the 183-day threshold.

#### Tax System Type:

Maryland operates on a progressive income tax system, meaning that tax rates increase as income levels rise. The state also imposes a sales tax on most goods and services, with a standard rate of 6%.

#### Tax Treaties:

Maryland does not have any tax treaties with foreign countries. However, individuals who are residents of a country with which the United States has a tax treaty may be able to benefit from certain provisions of the treaty when filing their Maryland taxes.

#### Entity Options:

For businesses operating in Maryland, there are several entity options available, including sole proprietorships, partnerships, limited liability companies (LLCs), S Corporations, and C Corporations. Each entity type has its own tax implications, so it's essential to consult with a tax advisor to determine the most suitable structure for your business.

#### Filing Requirements:

Individuals in Maryland are required to file a state tax return if their gross income exceeds specific thresholds. For the tax year 2021, single individuals under 65 must file if their income is over $12,400, while those over 65 must file if their income exceeds $13,750. The thresholds are higher for married couples filing jointly.

#### Tax Rates:

Maryland's income tax rates range from 2% to 5.75%, depending on the individual's income level. The state also allows local jurisdictions to impose an additional income tax, which can vary by county.

#### Deductions:

Maryland offers various deductions to residents, including the standard deduction or itemized deductions for expenses such as mortgage interest, property taxes, and charitable contributions. Taxpayers can also claim deductions for certain retirement account contributions and tuition expenses.

#### When to Hire an Advisor:

Given the complexity of Maryland's tax laws, individuals and businesses may benefit from hiring a tax advisor to ensure compliance and maximize tax savings. A tax advisor can provide guidance on deductions, exemptions, credits, and entity structuring, helping taxpayers make informed decisions that align with their financial goals.

#### Country-Specific Strategies:

For individuals with international ties, there are specific strategies to consider when filing taxes in Maryland. Non-resident aliens who generate income in Maryland may be subject to state income tax, depending on the source and type of income. Utilizing tax treaties, structuring investments efficiently, and understanding reporting requirements are essential for international taxpayers in Maryland.

In conclusion, understanding the intricacies of Maryland's tax system is essential for residents and businesses to fulfil their tax obligations and make informed financial decisions. By familiarising yourself with residency triggers, tax rates, deductions, filing requirements, and entity options, you can navigate Maryland's tax landscape effectively. For complex tax situations or international considerations, seeking the advice of a qualified tax advisor is recommended to ensure compliance and optimise tax planning strategies.