Income Tax - Subtraction Modification for Military Retirement Income (Keep Our Heroes Home Act)
HB0761 would expand Maryland’s income tax subtraction modification for military retirement income. Under current law, the subtraction is limited by age: individuals under 55 may subtract the first $12,500 of qualifying military retirement income, while those 55 and older may subtract the first $20,000. The bill replaces that age-based structure with a larger, phased-in exclusion available regardless of age.
Specifically, for tax years beginning after December 31, 2025 and before January 1, 2027, the first $25,000 of military retirement income would be subtracted from Maryland adjusted gross income. For tax years beginning after December 31, 2026, that amount would increase to $40,000. The bill defines military retirement income broadly to include retirement income and death benefits received as a result of military service, and it applies to income tied to service in the armed forces, reserve components, active duty, and certain uniformed services.
The bill amends § 10-207(q) of the Tax-General Article to increase the state income tax subtraction for military retirement income and remove the existing age-based eligibility tiers. This would reduce taxable income for qualifying retirees and survivors, lowering state income tax liability for affected taxpayers. The change would apply to Maryland residents with qualifying military retirement income and would take effect July 1, 2026, with the new subtraction amounts beginning in the 2026 and 2027 tax years as specified.
Based on the bill’s sponsorship and title, the measure appears to have broadly favorable intent toward military retirees and their families, with a policy goal of encouraging them to remain in Maryland. The bill was introduced with multiple delegates as sponsors and was assigned to the House Ways and Means Committee, but no committee transcript or recorded vote is available in the provided materials. As a result, the available record suggests support in principle, but does not show formal debate or final legislative sentiment.
The main policy issue is fiscal and distributive: increasing the subtraction reduces state revenue and provides a larger tax benefit to military retirees, which may raise questions about cost and whether the benefit should be targeted by age or expanded uniformly. Another possible point of contention is the size and pace of the increase, since the bill phases the subtraction from $25,000 to $40,000 over consecutive tax years. No specific objections, amendments, or opposing arguments are included in the provided discussion materials.