Expanded benefits for low-income families, pensioners among Maryland's 2006 tax season changes

ANNAPOLIS, Jan. 2, 2006 — Maryland Comptroller William Donald Schaefer has announced key changes to this year’s tax code, some of which are designed to help low-income families, taxpayers 65 and older and households with child or dependent care costs.

In addition, based on estimates by the comptroller’s Revenue Administration Division, nearly 1.3 million taxpayers are expected to e-file in the 2006 tax season, an increase of 14 percent over last year.

“As a whole, the state’s economy is good now. But it’s important to think about the people who aren’t doing as well, particularly Marylanders with lower paying jobs and taxpayers with fixed incomes,” said Schaefer. “I hope this year’s tax changes will ease the burden of rising health care and prescription costs, gas prices and help out the working poor.”

Earned income tax credit (EITC): In 2006, more Marylanders can qualify for the state’s refundable earned income tax credit based on expanded household income levels. More than 200,000 Maryland tax returns filed last year included claims for $82.3 million in refundable earned income tax credits.
Pension exclusion: For Marylanders 65 and older, the state’s maximum pension exclusion has increased from $20,700 to $21,500. The exclusion may also be applied for taxpayers who are totally disabled or if the taxpayer’s spouse is totally disabled.
Child care credit: The federal adjusted gross income ceiling for taxpayers who qualify for the state’s child or dependent care tax credit has increased to $50,000, up 25 percent over last year. The ceiling for qualifying taxpayers filing individual returns has also increased by 25 percent and is now $25,000. Taxpayers using child or dependent care may also qualify for a subtraction benefit which reduces a filer’s taxable income.
Increased filing extension: Taxpayers can now save time and paperwork by requesting one, six-month filing extension. Prior to the change, taxpayers first needed to obtain a four-month extension before receiving an additional two months. Any taxes owed must still be paid by this year’s April 17, 2006 filing due date.
Partial direct debit for e-filers: Electronic filers who file early and choose direct debit can now make partial payments and choose their own date to pay for any taxes owed, up to the April 17, 2006, filing deadline.
Additional exemption for Hurricane Katrina host families: Maryland taxpayers who sheltered displaced victims of Hurricane Katrina may be eligible for a one-time, $2,400 exemption for each additional dependent in the household, with a maximum of four exemptions. The exemption is doubled for dependents ages 65 or older, or blind.
E-file: More than 1.1 million Marylanders filed electronically in the 2005 tax season, an increase of 15.1 percent over 2004. For the 2006 tax season, it’s estimated that 14 percent more taxpayers will file online, either from home or through a tax professional.
Telefile: The IRS has discontinued its joint federal / state Telefile service for the 2006 tax season. As a result, the Comptroller’s Office will mail out 31,000 resident tax booklets in 2006 to those Maryland taxpayers who used the phone service last year. In all, 60,000 additional resident income tax booklets will be mailed this year, a 20 percent increase over last year. The discontinuation of Telefile coupled with the increased mailings will still save the state $55,000.

For more information about Maryland taxes, visit the Comptroller’s Web site.

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