MARYLAND TAXES & FEDERAL DECOUPLING: WHAT YOU NEED TO KNOW
A QUICK GUIDE FOR YOUR CLIENTS
WHAT IS “DECOUPLING”?
Sometimes Maryland chooses not to follow certain federal tax law changes. This is called decoupling. When Maryland decouples, it means your state taxable income may be different from your federal taxable income.
For you, this could mean:
A deduction you can take on your federal return may not be available in Maryland.
Or, Maryland may require you to spread that deduction out over several years instead of taking it all at once.
The result: Maryland taxable income can look higher than federal income, even if nothing else has changed.
Decoupling helps Maryland keep its tax base steady and avoid sudden swings in state revenue
EXPECTED DECOUPLING ITEMS FOR TAX YEAR 2025
Based on the 2025 One Big Beautiful Bill Act (OBBB), Maryland will temporarily decouple from these federal provisions:
Full Expensing of Research & Experimental (R&E) Expenses
Federal: Businesses can deduct 100% of R&E costs immediately
Maryland: Must spread deductions over several years
Impact: State revenue loss of about $28 8M in FY202660-day-report-obbb
Special Depreciation for Qualified Production Property (IRC §168(n))
Federal: New 100% bonus depreciation for certain long-lived production property.
Maryland: Will not allow the immediate write-off; normal depreciation applies.
Impact: State revenue loss of about $29.3M in FY202660-day-report-obbb
Business Interest Deduction Limitation (IRC §163(j))
Federal: Expands how much interest businesses can deduct.
Maryland: Keeps the stricter old limits in place
Impact: State revenue loss of about $7 4M in FY2026
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ALREADY DECOUPLED (NO CHANGE FOR 2025)
Bonus Depreciation (§168(k)) – Maryland has long been decoupled (except for manufacturers).
Estate Tax Exclusion – Maryland’s exclusion remains $5 million, even though the federal exclusion is now $15 million
Your Maryland taxable income may be higher than your federal taxable income.
Some deductions will take longer to claim in Maryland.
Planning ahead with your CPA or tax preparer can help you avoid surprises at tax time.
�� Tip: Always ask your tax professional whether Maryland has “decoupled” from a federal rule before assuming you’ll get the same benefit on your state return.
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