The recently-enacted Tax Cuts and Jobs Act will impact taxpayers throughout the United States, but it will have unique local effects that will vary across the country. The tax attorneys at Rosenberg Martin Greenberg in Baltimore have watched the progress of the bill, and are now studying how it will alter tax filings and payments by Maryland’s businesses and individual residents over the next several years.
Key Features of the Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act will have a significant impact on corporate income, with its reduction of the Federal corporate tax rate from 39% to 21%. Other key features of the Act regarding both corporate and individual Federal taxation are:
- Owners of pass-through businesses that pay their taxes on their individual returns will receive a new 20% deduction of certain types of business income. This deduction reduces the top marginal tax rate from 39.6% down to 29.6%.
- Individual tax rates have been reduced in all seven income brackets, and thresholds are higher in each bracket.
- The standard deduction for individuals has almost doubled, and will be $24,000 for married couples and $12,000 for individual filers. This increase will reduce the number of taxpayers that will need to itemize deductions, as the higher standard deduction is expected apply to almost 90% of all taxpayers.
- Taxpayers that do itemize will see a limitation of $10,000 on state income tax deductions. Some Maryland lawmakers objected to this limitation, as it has the potential to have a greater local impact on states with higher taxes, such as Maryland.
- Although the Act does not change the treatment of the deduction of interest on existing mortgages, it lowers the deductibility threshold for interest on new mortgage debt from $1 million to $750,000. The Act also excludes interest deductions for mortgages on second homes. Again, these limitations may have a disproportionately greater impact on Maryland taxpayers that are in higher income brackets.
- The exclusion for estate taxes has more than doubled, from $5.6 million per person to approximately $12 million. Estates are still taxed at a 40% rate, but the exclusion will pass more assets to heirs without any taxation.
Contact the Baltimore Tax Lawyers at Rosenberg Martin Greenberg
The real impact of the Tax Cuts and Jobs Act will not be fully understood for months, or even years. In that time, the Maryland tax attorneys at Rosenberg Martin Greenberg will continue to advise their local clients in Maryland and Delaware, as well as all corporate and individual taxpayers throughout the country, on how the new tax law will alter their personal or corporate financial positions. Please contact us for answers to your questions about the new law, or for more information on how the law will change the tax environment in your state.
Additional Resources on the New Federal Tax Bill:
- Patch.com: GOP Tax Plan: Maryland’s Winners and Losers. https://patch.com/maryland/annapolis/gop-tax-plan-marylands-winners-losers
- Washingtonpost.com: Maryland Governor says tax bill’s impact under analysis. https://www.washingtonpost.com/local/maryland-governor-says-tax-bills-impact-under-analysis/2017/12/19/f920c3c8-e4ef-11e7-927a-e72eac1e73b6_story.html?utm_term=.c668b661f005