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State Military Retirement Pay and Pension Tax Benefits

Retirement Pay and Pension Tax Deductions and Exclusions

Military Retirement Pay Income Tax Deduction

If you receive or the spouse of a military retiree receives military retirement income, you will be able to subtract up to $12,500, with an increase to the first $20,000 for individuals who are at least 55 years old on the last day of the taxable year, of your military retirement income from your federal adjusted gross income before determining your Maryland tax.  The retirement income must have been received as a result of any of the following military service:

  • Induction into the U.S. Armed forces for training and service 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

The benefit also applies to 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 of $31,100 for tax year 2019 under the conditions 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.

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.

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

To speak with the Maryland Taxpayer Service call:

  • From Central Maryland, 410-260-7980
  • From all other areas of Maryland, 1-800-MD-TAXES (1-800-638-2937)

Source: Maryland Office of the Comptroller


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