As more Americans reassess where they want to live in retirement, state taxes are playing a growing role in that decision.
For retirees considering Maryland, Jeff Wilson II, CPA/PFS, CGMA, the founder of the W2 Group, said in an interview that the tax picture is more favorable than many expect, particularly for older adults with modest to middle incomes, pensions, or military benefits.
Below is a transcript of that interview with Wilson, edited for clarity and brevity.
A Certified Public Accountant explains what retirees need to know about taxes in Maryland.
Unsplash
Maryland’s tax posture toward retirees
Robert Powell: If you’re thinking about retiring to Maryland, what would happen tax-wise? Joining me to talk about that is Jeff Wilson. He’s the founder of the W2 Group and a member of the AICPA’s PFP Champions Tax Task Force. Jeff, welcome.
Jeff Wilson II: Thank you for having me. I appreciate it.
Powell: You’re representing Maryland today. We’re talking about taxes for people who are already retired in Maryland or planning to retire there.
Wilson: Maryland is a great place to retire. One of the hallmarks of a good retirement state is how it treats seniors, particularly when it comes to taxes. In Maryland, that really starts with age and income.
Filing thresholds for older adults
Wilson: If you’re 65 or older and your income is relatively modest, you may not even have to file a state tax return. In many cases, individuals 65 and older earning under roughly $17,000 or $18,000 won’t have to file. For married couples, that threshold can be around $32,000. Those rules make life a little easier for seniors.
Social Security treatment
Wilson: Maryland generally does not tax Social Security benefits for seniors. That’s a major benefit, especially for retirees who rely heavily on Social Security as a primary income source.
Powell: That’s a big deal for many households.
Medicare premiums and medical deductions
Powell: What about Medicare premiums, such as Part B, Part D, or Medigap?
Wilson: Those premiums can be deductible as medical expenses, subject to adjusted gross income thresholds. As people age, medical expenses tend to rise, and because retirees often have lower income, it can be easier to exceed the 7.5 percent of AGI threshold required to deduct those costs.
Long-term care insurance credits
Powell: What about long-term care insurance?
Wilson: Maryland offers a tax credit for long-term care insurance premiums for individuals and certain family members. The credit can range from about $1,000 to $1,500, which can be meaningful for retirees who have incorporated long-term care coverage into their planning.
Also worth reading
- Retirees may want to rebalance as markets broaden, volatility rises
- Why “breaking even” on Social Security is the wrong goal
- The $83,250 secret every solo entrepreneur needs to know for 2026
Pension and retirement income exclusions
Powell: Many retirees receive income from pensions, IRAs, or retirement plans. How does Maryland handle that?
Wilson: Maryland allows retirees to exclude up to roughly $39,500, close to $40,000, of pension income from state taxation. For example, if someone receives a $50,000 pension, only about $10,500 would be subject to Maryland income tax. That makes Maryland especially attractive for retirees with pensions.
Additional personal exemptions for seniors
Powell: There are also additional personal exemptions for older adults, correct?
Wilson: Yes. Seniors receive an additional personal exemption of about $1,200. Married couples can benefit even more because both spouses may qualify for additional exemptions.
Property tax credits and homestead protections
Powell: Property taxes are a concern for many retirees. What should they know?
Wilson: Many Maryland counties offer homestead tax credits that can exempt the first several hundred thousand dollars of a home’s assessed value. For homeowners with modestly priced homes, that can result in very low, or even no, property tax liability. With property values rising nationwide, this is one of Maryland’s most valuable benefits for retirees.
Benefits for military and public safety retirees
Powell: What about retired service members and public safety workers?
Wilson: Maryland provides meaningful deductions for military retirees. Individuals can subtract up to $5,000 of retirement income, or up to $15,000 if they are age 55 or older. Similar benefits apply to certain public safety retirees, along with other credits and deductions.
Earned income and investment income in retirement
Powell: Some retirees continue to work or have investment income. How is that treated?
Wilson: Earned income, interest, dividends and capital gains are generally taxed under normal rules. However, higher income can cause some benefits to phase out. High-income retirees may also see more of their Social Security benefits taxed at the federal level, even though Maryland remains more favorable than many states.
Closing thoughts
Powell: You’re making Maryland sound appealing, especially with the tax benefits and the crab cakes.
Wilson: You get the crab cakes, too.
Related: Medicare mistakes seniors wish they’d known sooner
