Maryland - Ehrlich Wants Estate Tax to Mirror Federal Law, Seeks Caregiver Break

Maryland - Ehrlich Wants Estate Tax to Mirror Federal Law, Seeks Caregiver Break

By Kathy Lundy Springuel
Daily Tax Report

ANNAPOLIS, Md.--Gov. Robert Ehrlich (R) Jan. 12 proposed to link Maryland's estate tax to the federal tax and to offer an income tax deduction for caregivers who provide care in their homes to relatives with disabilities.
Both initiatives would require approval from the General Assembly, which opened its 90-day session Jan. 11.
Legislation enacted in 2004 "decoupled" Maryland from federal law provisions regarding estate taxes (102 DTR H-3, 5/27/04).
Ehrlich said in a news release that "this 'decoupling' led to a rise in Maryland state taxes and caused an increase in the complexity of an already complex tax system."

Exemption Frozen at $1 Million

He noted that the amount exempt from federal estate taxes is slated to rise gradually from $1 million to $3.5 million, but "as a result of the decoupling, the Maryland estate tax exempts only $1 million in assets."
In addition, he said, "the Maryland estate tax is imposed when the first spouse of a married couple dies; historically, this tax was not imposed until the surviving spouse died."
The governor proposed to "eliminate this unfairness by recoupling the federal and Maryland estate taxes" so that "beneficiaries of owners of many small businesses, farms, or homes that have significantly appreciated in value will no longer have to face the situation of selling that asset to satisfy a massive state tax bill."
The governor's estate tax proposal had not been introduced as legislation as of Jan. 13.

Different Estate Tax Bill Already Filed

A bill (S.B. 2) already introduced by Sen. Ulysses Currie (D) would raise the amount of assets exempt from the Maryland estate tax from $1 million to $2 million, effective Dec. 31.
The measure also would limit the tax to 16 percent of the amount by which a decedent's adjusted taxable estate exceeds the lesser of $2 million or the applicable exclusion amount.

Caregiver Tax Break

Ehrlich also proposed to offer an income tax deduction to caregivers with incomes up to $150,000 who provide care in their homes to relatives with disabilities, provided the person being cared for does not have a federal adjusted gross income exceeding $10,000.
The deduction would reduce the caregiver's taxable Maryland income by $1,000. With a state tax rate of 4.75 percent, the savings would be $47.50 in state taxes plus an additional savings of roughly $30 in county income taxes, which vary by jurisdiction.
The caregiver proposal had not been submitted as legislation as of Jan. 13.
The governor's news releases are available at http://www.governor.maryland.gov/pressreleases/2006/press06.html.
Additional information about S.B. 2 is available at http://mlis.state.md.us/2006rs/billfile/sb0002.htm.