2018 Income Tax State of maryland

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shel
Posts: 15
Joined: Mon May 23, 2011 4:04 pm

2018 Income Tax State of maryland

Post by shel » Sat Mar 02, 2019 12:07 pm

Just did income taxes. Surprise.

Did both ways. Itemizing and taking standard deduction.

In Maryland you have to take standard deduction on state if you take it on federal.

net result FOR ME: I pay less taxes between the two if I itemize, even though I have to pay considerably more to federal.

puzzler
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Joined: Tue Jan 02, 2018 1:37 pm

Re: 2018 Income Tax State of maryland

Post by puzzler » Sat Mar 02, 2019 2:24 pm

I live in Virginia, but had the exact same experience.

Due to the difference in the standard deductions (24k for fed, 6k for VA), it seems like if your itemized deductions are in that weird ~20k zone, it could work out better overall to itemize. Really dumb situation.

4803
Posts: 20
Joined: Sun May 29, 2016 11:51 pm
Location: Maryland

Re: 2018 Income Tax State of maryland

Post by 4803 » Sat Mar 02, 2019 6:04 pm

Hey,

Just finished with our 2018 income taxes too (and so happy about that :)

Overall, we paid about 13.5K less in 2018 compared with 2017 rules with the same 2018 numbers (the effect of the new tax law).
About 12.5K of the difference was due to the elimination of the alternative minimum tax for people making less than a $1M.

Even though we are in a blue state, the SALT limitation effects were pretty much cancelled in our case by the new brackets and reduced rates.

Interestingly, similarly to the OP, taking the itemized deduction would have increased our federal taxes some but would have decreased our MD taxes even more. We decided to take the standard deduction anyway because the difference was small (tens of dollars) and we preferred to keep the return (relatively) simple. (as the OP noted, in MD one can claim the itemized deduction on the MD return only if that was the selection for the federal return).

Best wishes,

:) 4803.

jebmke
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Re: 2018 Income Tax State of maryland

Post by jebmke » Sat Mar 02, 2019 6:08 pm

shel wrote:
Sat Mar 02, 2019 12:07 pm
Just did income taxes. Surprise.

Did both ways. Itemizing and taking standard deduction.

In Maryland you have to take standard deduction on state if you take it on federal.

net result FOR ME: I pay less taxes between the two if I itemize, even though I have to pay considerably more to federal.
I do over 100 Maryland returns per year. We often check this. It is not uncommon to find that forcing itemization generates a better combined deal. This was true even before 2018. In rarer situations it sometimes pays to take a sales tax deduction on Schedule A even if it is smaller than the income tax deduction.
When you discover that you are riding a dead horse, the best strategy is to dismount.

Pete3
Posts: 70
Joined: Thu Jul 01, 2010 12:10 pm

Re: 2018 Income Tax State of maryland

Post by Pete3 » Sat Mar 02, 2019 7:10 pm

shel wrote:
Sat Mar 02, 2019 12:07 pm
Just did income taxes. Surprise.

Did both ways. Itemizing and taking standard deduction.

In Maryland you have to take standard deduction on state if you take it on federal.

net result FOR ME: I pay less taxes between the two if I itemize, even though I have to pay considerably more to federal.
Me too and TurboTax did not detect this - it was recommending that I take the standard federal deduction, it doesn't optimize across Fed plus State combined. I had to force itemizing on federal to get a better total result

delamer
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Re: 2018 Income Tax State of maryland

Post by delamer » Sat Mar 02, 2019 7:19 pm

I am curious as to what the major factor was in making itemizing the better choice.

Large amounts of mortgage interest and/or property taxes?

Pete3
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Joined: Thu Jul 01, 2010 12:10 pm

Re: 2018 Income Tax State of maryland

Post by Pete3 » Sat Mar 02, 2019 7:27 pm

For me, $23400 if itemize versus $24000 for std deduction (Fed)

For MD state, std deduction is $4500 versus $14700 itemized

So paying taxing on $600 more on the fed gives $10000 higher deduction on state.

Home mortgage interest is what made it close since SALT was capped at $10k

jebmke
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Re: 2018 Income Tax State of maryland

Post by jebmke » Sat Mar 02, 2019 9:07 pm

Pete3 wrote:
Sat Mar 02, 2019 7:10 pm
Me too and TurboTax did not detect this - it was recommending that I take the standard federal deduction, it doesn't optimize across Fed plus State combined.
I highly doubt any tax software does.
When you discover that you are riding a dead horse, the best strategy is to dismount.

thx1138
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Re: 2018 Income Tax State of maryland

Post by thx1138 » Sat Mar 02, 2019 9:35 pm

If we hadn’t paid off our mortgage we would have been in the same situation. This tends to happen if you have mortgage interest of a bit less than 14k. With SALT limit you’d be below the new federal standard deduction but way above the MD state deduction. The new lower federal tax brackets accentuate the effect as well since the federal marginal rate is now also lower making the trade off between federal and state deduction less favorable to the federal side than in the past.

mbres60
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Re: 2018 Income Tax State of maryland

Post by mbres60 » Sat Mar 02, 2019 9:45 pm

We did it both ways. Taking the standard deduction was best for us. Previously we itemized. Maybe it is because we have no mortgage deduction.

4803
Posts: 20
Joined: Sun May 29, 2016 11:51 pm
Location: Maryland

Re: 2018 Income Tax State of maryland

Post by 4803 » Sat Mar 02, 2019 10:13 pm

delamer wrote:
Sat Mar 02, 2019 7:19 pm
I am curious as to what the major factor was in making itemizing the better choice.

Large amounts of mortgage interest and/or property taxes?
Yes, as well as any other item that adds to itemized deduction, such as charitable contributions.

Best wishes,

:) 4803.

UpperNwGuy
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Re: 2018 Income Tax State of maryland

Post by UpperNwGuy » Sat Mar 02, 2019 10:27 pm

I wonder if Maryland is unusual in having such a low standard deduction. My understanding is that many states increased their standard deductions in 2018 to follow the lead of the Federal tax law changes.

TBillT
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Joined: Sat Sep 17, 2011 1:43 pm

Re: 2018 Income Tax State of maryland

Post by TBillT » Sat Mar 02, 2019 11:09 pm

UpperNwGuy wrote:
Sat Mar 02, 2019 10:27 pm
I wonder if Maryland is unusual in having such a low standard deduction. My understanding is that many states increased their standard deductions in 2018 to follow the lead of the Federal tax law changes.
Virginia standard deduct is low too $3000/$6000 joint so now we are similar situation to MD. We might have recently increased it but not much. So this means itemization on state return is important tax reduction if you can do it.

UpperNwGuy
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Re: 2018 Income Tax State of maryland

Post by UpperNwGuy » Sun Mar 03, 2019 5:58 am

TBillT wrote:
Sat Mar 02, 2019 11:09 pm
UpperNwGuy wrote:
Sat Mar 02, 2019 10:27 pm
I wonder if Maryland is unusual in having such a low standard deduction. My understanding is that many states increased their standard deductions in 2018 to follow the lead of the Federal tax law changes.
Virginia standard deduct is low too $3000/$6000 joint so now we are similar situation to MD. We might have recently increased it but not much. So this means itemization on state return is important tax reduction if you can do it.
In DC, they bumped up the standard deduction, so there is no benefit to itemizing DC taxes if you take the standard deduction on Federal.

Pete3
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Joined: Thu Jul 01, 2010 12:10 pm

Re: 2018 Income Tax State of maryland

Post by Pete3 » Sun Mar 03, 2019 6:04 am

Maryland's legislators realized this problem in 2018 after the new tax law passed and considered de-coupling the state tax return from the federal so that you could itemize on state even if you took the standard deduction on the federal but they did not end up doing anything - this gives Maryland a large windfall in additional taxes.

They are considering the same de-coupling legislation again this year (2019) but again I doubt they will be willing to part with this extra tax revenue:

https://www.heraldmailmedia.com/instant ... ba2cb.html

SGM
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Re: 2018 Income Tax State of maryland

Post by SGM » Sun Mar 03, 2019 6:24 am

Thanks for the post. I haven't downloaded the state form yet but will run the numbers both ways.

I wonder if our out of state vacation home real estate taxes can be deducted from our income for state of residence tax purposes.

TBillT
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Joined: Sat Sep 17, 2011 1:43 pm

Re: 2018 Income Tax State of maryland

Post by TBillT » Sun Mar 03, 2019 10:00 pm

Pete3 wrote:
Sun Mar 03, 2019 6:04 am
Maryland's legislators realized this problem in 2018 after the new tax law passed and considered de-coupling the state tax return from the federal so that you could itemize on state even if you took the standard deduction on the federal but they did not end up doing anything - this gives Maryland a large windfall in additional taxes.
We are in same boat in Virginia, and I kept asking what other state could possibly be doing this?...now I realize our neighbors in MD were doing this. Now I see where we got the idea.

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