Many Maryland taxpayers may get a break!

For those clients of ours in Maryland, good news could be on the way.  While the federal estate tax exemption is $5.34M, those of us in MD are limited to just $1M before the taxman cometh.  That may be about to change.   Currently, Maryland has the highest estate tax rate in the country, with only that $1M exemption along with a 16% tax rate.

Senate President Thomas V Mike Miller, with bi-partisan support, has signed a bill that would increase the exemption by $1M a year over the next 4 years, equaling the federal exemption by 2017.  There’s still work to be done, as it’s not a done deal yet.  Joining the fight is the Maryland Chamber of Commerce, citing the changing of the exemption tax a top priority for 2014.  As long as Gov. O’Malley can be convinced the state is losing wealthy residents due to this tax, it has a chance of passing.  Bordering states such as VA & WVA, as well as TX, FL, NC, SC (and many others) have their tax rates tied to the federal rate.

Here’s an example of the potential savings for Marylanders if this or a similar bill passes.  Let’s look at a $3.5M estate.  Currently, the 1^st $1M is not taxed.  The next $2.5M will incur a tax of  $400k.  If that same person lived across the river in VA, there would be NO TAX due.  If the death were to occur one year from the bill’s passage, the MD estate would incur a tax of ONLY $240k, with VA still at $0.  Two years, and the tax consequence for MD would be $80,000, and so on.  Stay tuned!

 

Sources:

Bob Bender, Aronson LLC

Gay Haber, Baltimore Business Journal (1/15/14)