On March 21, 2014, for the first time in twelve years, Maryland has adjusted its estate tax. Maryland General Assembly passed House Bill 739 / Senate Bill 602 which changes the “unified credit” amount, i.e. the threshold of assets above which the estate tax applies, from the current $1 million to the federal credit amount. The Senate passed the measure by a vote of 36 to 10. The House vote was 119 to 14.
This bill alleviates the problems in Maryland’s estate tax caused by its “de-coupling” from the Federal estate tax exemption. The bill gradually raises Maryland’s $1 million estate tax exemption to match that of the federal exemption. The Maryland exemption will increase to $1.5 million in 2015, $2 million in 2016, $3 million in 2017 and $4 million in 2018. Finally, in 2019 the Maryland exemption will match the federal exemption which is projected to be $5.9 million (up from $5.34 million today (indexed for inflation). The re-coupling of Maryland’s estate tax with the Federal exemption will allow for more streamlined estate planning.
Supporters of the bill cited analysis IRS data that found that Maryland lost more than $7 billion in taxable income between 1992 and 2010, mostly to Florida. Supporters reasoned that many wealthy Maryland residents left Maryland for more retirement and tax friendly states. Lawmakers argued that more taxes (other than estate taxes) would be generated if these residents remained in Maryland.
Maryland is one of 19 states plus the District of Columbia that imposes state death taxes.