Federal Tax Benefits That Don’t Flow to Maryland

Tip Income Deduction

Federal: Up to $25,000 of qualified tips can be deducted.

Maryland: No deduction allowed tips remain fully taxable for state purposes.

Overtime Pay Deduction

Federal: Deduction for the extra portion of overtime wages (up to $25,000)

Maryland: No deduction allowed all overtime pay is taxable in Maryland

Automobile Loan Interest Deduction

Federal: Up to $10,000 of interest on loans for new personal vehicles may be deducted.

Maryland: No deduction allowed auto loan interest remains taxable at the state level.

Additional Deduction for Seniors (65+)

Federal: Extra $6,000 deduction for taxpayers age 65 or older.

Maryland: No corresponding deduction state taxable income is unaffected.

Individual Federal Tax Breaks That Won’t Apply in Maryland

Why This Matters

The federal One Big Beautiful Bill Act (OBBB) added several new deductions for individuals starting in 2025. While these benefits reduce federal taxable income, they do not reduce Maryland taxable income That means your Maryland return may not show the same savings you see on your federal return

⚖ What This Means for You

Your Maryland taxable income may be higher than your federal taxable income. The difference will show up when your tax professional reconciles your state return. Planning ahead can help avoid surprises at filing time

�� Tip for Clients: Always ask your tax preparer whether a federal tax break also applies in Maryland. Not all benefits “carry over.”

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Federal Tax Benefits That Don’t Flow to Maryland

Published on Sep 22, 2025

MDSociety

Starting in 2025, the One Big Beautiful Bill Act (OBBBA) introduced several new tax breaks at the federal level. While these deductions reduce your federal taxable income, Maryland has decoupled from many of these provisions. This means the benefits do not flow through to your Maryland return—and your taxable income at the state level may be higher than you expect . Examples of Federal Benefits That Don’t Apply in Maryland: Tip Income Deduction – Federal allows up to $25,000; Maryland does not. Overtime Pay Deduction – Federal allows a deduction for overtime wages; Maryland does not. Automobile Loan Interest – Federal allows up to $10,000 deduction for new car loans; Maryland does not. Additional Deduction for Seniors (65+) – Federal provides an extra $6,000; Maryland does not.

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