Maryland recently released a tax alert detailing how the federal One Big Beautiful Bill Act (PL 119-21), affects tax in the state. On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (PL 119-21) into law. Maryland has automatically decoupled from several business provisions of the Act and clarified that certain individual deductions do not flow through to Maryland returns.
For tax years 2025 through 2028, PL 119-21 allows federal deductions for income from tips, overtime pay, interest on automobile loans, and an additional deduction for individuals aged 65 or older. However, these deductions do not affect federal adjusted gross income (FAGI), which is Maryland’s starting point for calculating state income tax.
For income tax withholding purposes, while these provisions may reduce federal tax liability and affect federal withholding, they provide no Maryland tax benefit. Employees will still owe Maryland income tax on the full amounts of tips, overtime pay, and other income despite the federal deductions. Maryland withholding calculations should not be adjusted for these federal benefits.
Maryland has also decoupled from three business-related provisions affecting research expenditures, business interest deductions, and production property depreciation. These provisions require taxpayers to make adjustments on their Maryland returns but generally do not affect individual wage withholding.
