Income tax credit; reauthorizing credit for construction of energy efficient property for certain tax years. Effective date.

2025 Regular Session Introduced by Mary Boren

Expands Maryland's military retirement income subtraction, eliminating age limits and raising caps to $25,000 in 2025 and $40,000 from 2026, helping veterans stay in state.

Second Reading referred to Revenue and Taxation Committee then to Appropriations Committee

SB 99 — Income Tax: Subtraction Modification for Military Retirement Income

(“Keep Our Heroes Home Act”)

Status & Sponsors
- Bill: SB 99 (Sen. Salling) — cross-file: HB 60
- Introduced: Early January 2025 (prefiled Oct 29, 2024)
- Committee assignment: Budget & Taxation (Maryland)
- Effective date (as written): July 1, 2025

Purpose / Intent
- To expand Maryland income‑tax relief for military retirees by raising the annual subtraction (exclusion) for military retirement income, and by making the expanded exclusion available regardless of the retiree’s age — with the stated intent of helping keep veterans in Maryland.

Key provisions
- Modifies the existing military retirement income subtraction (Tax‑General §10‑207):
- Tax year 2025 (i.e., taxable years beginning after 12/31/2024 but before 1/1/2026): increases the subtraction to $25,000 per individual.
- Tax year 2026 and thereafter: increases the subtraction to $40,000 per individual.
- Removes the current age‑based tiers (previously lower limits for taxpayers under certain ages), so the new maximum applies regardless of age.
- Definition of eligible “military retirement income” remains tied to retirement or death benefits resulting from qualifying military service, including active duty/reserve service, Maryland National Guard membership, and certain commissioned corps (e.g., Public Health Service, NOAA).
- Does not change other exclusions (for example, the standard pension exclusion available to those 65+, totally disabled, or with a disabled spouse still exists for qualifying retirement income not covered by the military subtraction).

Who is affected
- Directly: Maryland resident taxpayers who receive military retirement pay (including certain survivors and death benefits) — they would be able to subtract a larger portion of that income from Federal AGI when computing Maryland taxable income.
- Indirectly: State general fund and local income tax revenues (local income tax share declines as a result).

Fiscal and implementation impacts (Department of Legislative Services / Comptroller)
- State general fund revenue losses (estimated):
- FY 2026: –$11.3 million
- FY 2027: –$25.2 million
- FY 2028: –$26.2 million
- FY 2029: –$27.2 million
- FY 2030: –$28.3 million
- Local government income tax revenue losses (estimated):
- FY 2026: –$6.9 million; FY 2027: –$15.3 million; similar annual impacts thereafter.
- Expenditures: no direct fiscal impact on State or local expenditures identified.
- Small business: none identified.
- Estimates are based on Comptroller and tax‑return data (tax year 2021 baseline, including Form 502SU and 1099‑R reporting).

Timeline / next steps
- Bill takes effect July 1, 2025; the larger $40,000 subtraction applies starting in tax year 2026.
- Implementation will rely on Comptroller/Treasurer systems to apply the revised subtraction on Maryland returns for affected tax years.

Notes & context
- The bill builds on prior changes (Chs. 613 & 614 of 2023) that adjusted earlier age‑based subtraction amounts.
- Policymakers and budget analysts will weigh the revenue loss against the policy goal of veteran retention and potential economic/community benefits of keeping retired military personnel in Maryland.