Retirement Pay and Pension Tax Deductions and Exclusion

​​​​​​​​​Military Retirement Pay Income Tax Deduction

Veterans or spouses of military retirees that receive military retirement income may subtract some of their retirement income from their federal adjusted gross income before determining Maryland tax.

  • Taxpayers at least 55 years of age on the last day of the taxable year may subtract up to $20,000 of military retirement income received in the taxable year.
  • Taxpayers under the age of 55 on the last day of the taxable year may subtract up to $12,500 of military retirement income received in the taxable year.

To subtract the military retirement income, complete Maryland Form 502 and follow the instructions included in the Maryland resident tax booklet for line 13.

Eligibility

The retirement income must have been received as a result of any of the following military service:

  • Induction into the U.S. Armed Forces under the Selective Training and Service Act of 1940 or a subsequent Act of similar nature
  • Membership in a reserve component of the U.S. Armed Forces
  • Membership in an active component of the U.S. Armed Forces
  • Membership in the Maryland National Guard
  • Persons separated from active‐duty employment with the commissioned corps of the Public Health Service, the National Oceanic and Atmospheric Administration, or the Coast and Geodetic Survey.

Maryland Pension Exclusion

If you are 65 or older or totally disabled (or your spouse is totally disabled), you may qualify for Maryland’s maximum pension exclusion described in Instruction 13 of the Maryland resident tax booklet​​​. If you’re eligible, you may be able to subtract some of your taxable pension and retirement annuity income from your federal adjusted gross income.

Eligibility

This subtraction applies only if:

  • You were 65 or older or totally disabled, or your spouse was totally disabled, on the last day of the tax year; and
  • You included on your federal return income received as a pension, annuity, or endowment from an “employee retirement system.” A traditional IRA, a Roth IRA, a simplified employee plan (SEP), a Keogh Plan, or an ineligible deferred compensation plan does not qualify.

Resources

For more information visit a local office for taxpayer assistance. For locations, go to the Maryland Comptroller website.

To speak with the Maryland Taxpayer Service call:

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