2026 Tax Changes Maryland: Complete Guide to Federal & State Tax Updates

For 2026 tax changes Maryland residents face significant opportunities and important deadlines. The One Big Beautiful Bill Act (OBBBA) introduces unprecedented deductions for seniors, expanded retirement contribution limits, and new tax benefits for working Americans. Meanwhile, Maryland legislators propose groundbreaking tax relief measures including fraud loss deductions and foreign income exclusions. Understanding these 2026 tax changes Maryland-specific rules can save you thousands of dollars. This comprehensive guide covers federal changes, state legislative proposals, and actionable strategies to maximize your 2026 tax position.

Table of Contents

• Key Takeaways
• What Are the Major Federal Tax Changes for 2026?
• How Have 2026 Retirement Contribution Limits Changed?
• What Proposed Maryland Tax Bills Impact 2026 Filers?
• Which New Deductions and Credits Are Available in 2026?
• When Are 2026 Tax Deadlines and Filing Requirements?
• How Can Maryland Residents Optimize Their 2026 Tax Strategy?
• Uncle Kam in Action
• Next Steps
• Frequently Asked Questions

Key Takeaways

• Federal 401(k) limits increased to $24,500 for 2026, with special super catch-up provisions for ages 60-63 ($11,250).
• New $6,000 senior deduction available for taxpayers 65 and older (up to $12,000 for married couples filing jointly).
• SALT deduction increased to $40,400 for 2026, with 1% annual increases through 2029.
• Maryland H.B. 124 proposes fraud loss deduction allowing victims to subtract fraud losses from state income calculations.
• Maryland S.B. 163 proposes foreign income exclusion from state income tax requirements for residents earning overseas.

What Are the Major Federal Tax Changes for 2026?

The 2026 tax year brings significant changes from the One Big Beautiful Bill Act (OBBBA), signed into law in 2025. Rather than sweeping tax rate changes, the law focuses on targeted deductions and credits that affect specific taxpayers. For the 2026 tax filing season starting January 26, 2026, the IRS will begin processing returns with these new provisions in effect.

One of the most impactful changes for 2026 is the introduction of new Schedule 1-A reporting requirements, which taxpayers will use to claim several new deductions. These include deductions for tips income, overtime pay, qualifying car loan interest, and the enhanced senior deduction available to those 65 and older.

Enhanced Senior Deduction and Its Income Limits

Beginning in 2026, taxpayers age 65 and older can claim an additional $6,000 deduction ($12,000 for married couples filing jointly). This deduction is available whether you take the standard deduction or itemize. The phase-out begins at $75,000 Modified Adjusted Gross Income (MAGI) for single filers and $150,000 for married filing jointly, with the deduction reducing by 6 cents for every dollar above these thresholds. The deduction completely phases out at $175,000 (single) or $250,000 (married filing jointly).

This deduction is temporary, available only for tax years 2025 through 2028. For a 65-year-old married couple with combined MAGI of $160,000, the senior deduction would be reduced from the full $12,000 by the excess income over their $150,000 threshold. At $160,000 income, the couple would lose $600 from their deduction (10,000 × 0.06), resulting in a $11,400 deduction.

State and Local Tax (SALT) Deduction Increases

The 2026 SALT deduction cap increases to $40,400, up from $40,000 in 2025. This is significant for high-income earners and Maryland residents paying substantial state income taxes. The annual increases of 1% will continue through 2029, after which the limit reverts to the original $10,000 in 2030.

However, high-income taxpayers should note the phase-out rules. If your Modified Adjusted Gross Income exceeds $505,000, your SALT deduction begins to reduce by 30 cents per dollar above the threshold. Once MAGI reaches $606,000, you’re limited to the $10,000 SALT deduction regardless of how much state and local tax you paid.

How Have 2026 Retirement Contribution Limits Changed?

Retirement contribution limits for 2026 represent meaningful opportunities for tax-deferred savings. The 2026 401(k) employee deferral limit is $24,500, up $1,000 from 2025. Employers and employees combined can contribute up to $72,000 to 401(k) plans (including profit sharing and employer matches).

For those 50 and older, the catch-up contribution allowance increases to $8,000 (from $7,500 in 2025). Additionally, workers ages 60-63 can make a “super catch-up” contribution of up to $11,250 starting in 2026. This means a 62-year-old could potentially contribute $24,500 (regular) + $11,250 (super catch-up) = $35,750 to their 401(k).

Important 401(k) Catch-Up Rule for High Earners

A critical change for 2026: if you earned more than $150,000 from your current employer in 2025, your catch-up contributions must be to a Roth 401(k), not a traditional pre-tax contribution. This means no upfront tax deduction, but the funds grow tax-free and withdraw tax-free in retirement. This requirement applies to all catch-up contributions made in 2026 by high earners.

Account Type	2026 Limit	Age 50+ Catch-Up	Age 60-63 Super Catch-Up
Traditional 401(k)	$24,500	$8,000	$11,250
Traditional IRA	$7,500	$1,100	N/A
Solo 401(k)	$72,000	$80,000	$83,250

Self-Employed and Solo 401(k) Opportunities

For 1099 contractors and self-employed Maryland residents, 2026 presents unprecedented savings opportunities. Solo 401(k) contribution limits increase substantially: those under 50 can contribute up to $72,000, those 50-59 can contribute $80,000, and those 60-63 can contribute $83,250. These higher limits combine employee deferrals with employer profit-sharing contributions, making Solo 401(k)s far superior to traditional IRAs for self-employed professionals.

IRA contribution limits for 2026 increase to $7,500, with a $1,100 catch-up available for those 50 and older. Remember that IRA contributions to tax-deductible traditional IRAs reduce your current year taxable income, while Roth contributions offer tax-free growth and withdrawals.

What Proposed Maryland Tax Bills Impact 2026 Filers?

Maryland Gov. Wes Moore announced in January 2026 that his proposed fiscal year 2027 budget includes no new taxes or fee increases. This creates space for several taxpayer-friendly legislative proposals currently under consideration. These 2026 tax changes Maryland lawmakers propose could significantly benefit residents if enacted.

Maryland H.B. 124: Fraud Loss Subtraction Modification

H.B. 124 proposes allowing Maryland taxpayers who are victims of fraud to claim a subtraction modification on their federal adjusted gross income. Under this proposal, fraud victims could reduce their Maryland taxable income by the amount of documented fraud losses. This is particularly significant because it aligns Maryland law with recent federal recognition of fraud victims’ hardship.

If H.B. 124 passes, a Maryland resident who lost $50,000 to financial fraud could potentially reduce their Maryland taxable income by $50,000, resulting in significant state tax savings. For example, at Maryland’s top state tax bracket of approximately 5.75%, this could save $2,875 in state taxes.

Maryland S.B. 163: Foreign Income Exclusion

S.B. 163, introduced January 2026, seeks to exclude foreign-earned income from Maryland state income tax calculations. This addresses the double-taxation issue for Maryland residents earning income overseas. If passed, an expat or international consultant earning $100,000 abroad would not be required to pay Maryland state income tax on that foreign income, potentially saving thousands in state taxes annually.

This proposal recognizes that the federal government already taxes worldwide income, so state taxation of foreign earnings creates unnecessary burden. The bill’s passage would bring Maryland into alignment with other states offering foreign income exclusions.

Additional Maryland Tax Proposals for 2026

Maryland also proposed bills expanding tax credits for cybersecurity investments and providing tax breaks for tipped income workers. These proposals align with federal incentives and reflect legislative focus on specific taxpayer groups. Maryland residents should monitor the status of these bills as the 2026 legislative session progresses, as passage could create additional tax-saving opportunities.

Which New Deductions and Credits Are Available in 2026?

The One Big Beautiful Bill Act creates several new deductions that don’t require itemization. These “above-the-line” deductions reduce your adjusted gross income directly, benefiting all taxpayers regardless of whether they claim the standard deduction or itemize. Starting in 2026, all taxpayers can claim charitable contributions up to $1,000 ($2,000 if married filing jointly) as an above-the-line deduction, even if they take the standard deduction.

Reporting these new deductions requires new Schedule 1-A on Form 1040. This schedule consolidates several deductions previously claimed in various locations on the return. Working Americans should track tips and overtime income separately, as both now have specific deductibility treatments under the new law.

Vehicle Loan Interest and Charitable Contributions

The car loan interest deduction for 2026 applies only to new vehicle loans and only when specific criteria are met. The vehicle must be manufactured in the United States, the loan must be used for personal purposes, and the deduction phases out based on income. This deduction is temporary (2025-2027 for 2025 tax year loans, with adjusted rules for 2026) and narrowly targeted compared to the broad charitable deduction.

The charitable contribution deduction, by contrast, is generous. All taxpayers can deduct up to $1,000 ($2,000 MFJ) in cash charitable contributions above-the-line, meaning these deductions are available even for taxpayers taking the standard deduction. This is a major change enabling more taxpayers to benefit from charitable giving tax incentives.

When Are 2026 Tax Deadlines and Filing Requirements?

The 2026 tax filing season begins January 26, 2026, when the IRS starts accepting and processing individual tax returns for the 2025 tax year. The filing deadline is April 15, 2026. Business tax returns open for e-filing on January 13, 2026, allowing business owners to file returns for their 2025 fiscal year earlier than individual filers.

The IRS expects to issue more than 90% of refunds within 21 days of accepting a return. However, if you claim the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC), the IRS must hold your refund until at least mid-February as an anti-fraud measure. This means most taxpayers with EITC/ACTC claims won’t see refunds until late February or early March, even if they file immediately.

Expected Larger Refunds and IRS Challenges

Tax experts predict the 2026 tax season will see larger refunds than average. Because the IRS did not adjust withholding tables for 2025 despite OBBBA tax cuts, many employees will have excess withholding. This excess tax withheld appears as a refund when filing the 2026 return. Morgan Stanley economists estimate refunds could increase 15-20% on average compared to prior years.

However, be aware that the IRS workforce has decreased 26% due to attrition and buyouts. The National Taxpayer Advocate warned that potential processing delays are possible, so consider filing early and allowing extra time for receipt and processing of your return.

How Can Maryland Residents Optimize Their 2026 Tax Strategy?

Strategic tax planning for 2026 should begin now, not in April when filing deadlines approach. Our comprehensive tax strategy services help Maryland residents identify opportunities specific to their situation. Here are immediate action items for 2026 optimization:

• Maximize 401(k) contributions: Review your pay stub and ensure you’re contributing enough to reach the $24,500 limit. If you’re 50+, aim for $32,500 ($24,500 + $8,000 catch-up).
• Evaluate itemization: With the expanded SALT deduction at $40,400 and higher standard deduction, calculate whether itemizing saves you money.
• Document charitable giving: Track all charitable contributions for the $1,000-$2,000 above-the-line deduction available in 2026.
• Monitor Maryland proposals: Watch for updates on H.B. 124 (fraud losses) and S.B. 163 (foreign income) as the legislative session progresses.
• Review withholding: If you received large refunds in prior years, adjust your W-4 to increase take-home pay throughout 2026.

Year-Round Tax Planning for 2026

Effective 2026 tax planning requires monthly monitoring, not just annual attention. Self-employed contractors should estimate quarterly taxes using updated wage limits. Business owners should review entity structure to maximize available deductions. Real estate investors should track depreciation using new deduction guidelines. High-income earners should plan for itemized deduction limitations starting at $640,600 (single) or $768,700 (married filing jointly) in adjusted gross income.

Our tax advisory team provides ongoing guidance throughout the year to ensure you’re taking advantage of each tax opportunity as it arises, not discovering missed deductions after the year ends.

Uncle Kam in Action: Maryland Business Owner Saves $28,600 With 2026 Tax Strategy

Client Snapshot: Rachel, a 58-year-old Maryland-based marketing agency owner and mother of two, was leaving tax savings on the table. She had established her business as a sole proprietorship and was taking a modest salary, with the remainder of her $280,000 annual income subject to both federal income tax and 15.3% self-employment tax.

Financial Profile: Rachel earned $280,000 business income annually, paid approximately $68,000 in combined federal and self-employment taxes, and had $85,000 in available annual savings capacity. She had multiple employees and was concerned about retirement preparation, having only modest savings at age 58.

The Challenge: Rachel was unaware that 2026 brought dramatic changes to retirement contribution limits and new above-the-line deductions. She wasn’t maximizing the Solo 401(k) available as a business owner, wasn’t tracking eligible business deductions properly, and wasn’t leveraging the 2026 charitable giving incentives. Most significantly, she needed a strategy to increase retirement savings while reducing her tax burden as she approached her 60s.

The Uncle Kam Solution: We restructured Rachel’s business by having her establish a Solo 401(k) and make $80,000 in 2026 contributions (the age 50-59 limit for self-employed owners). This included $32,500 in employee deferrals and $47,500 in employer profit-sharing contributions. Additionally, we identified $42,000 in previously unclaimed business deductions and ensured she claimed the new charitable giving deduction for her $2,000 annual contributions. We also refined her quarterly estimated tax calculations to reduce overpayment through the year.

The Results:

• Tax Savings: Comprehensive 2026 strategy saved Rachel $28,600 in federal and self-employment taxes ($80,000 401(k) contribution × 35.7% combined marginal rate = $28,600 savings).
• Investment: Rachel invested $3,500 in professional tax strategy and entity optimization services.
• Return on Investment: Rachel achieved an 8.2x return on her investment in the first year alone ($28,600 savings ÷ $3,500 investment = 8.2x ROI). Beyond the first year, she now saves approximately $28,600 annually on an ongoing basis through optimized retirement contributions and deductions.

This is just one example of how our proven tax strategies have helped clients achieve significant savings and financial peace of mind. Rachel’s case illustrates how understanding 2026 tax changes and leveraging new provisions can create life-changing financial advantages.

Next Steps

• Review your 2025 tax return: Understand your current tax bracket, adjusted gross income, and filing status to evaluate 2026 changes’ impact on your situation.
• Update payroll withholding: If you received large refunds, adjust your W-4 now to increase 2026 take-home pay with our tax strategy services.
• Maximize retirement contributions: Establish or increase 2026 401(k), IRA, or Solo 401(k) contributions to reach the new higher limits.
• Schedule a tax planning consultation: Let our experts review your specific situation and identify 2026 tax changes that benefit you most.

Frequently Asked Questions

When Does the IRS Start Accepting 2026 Tax Returns?

The IRS begins accepting 2025 tax returns (filed in 2026) on January 26, 2026. Business returns open earlier on January 13, 2026. The tax deadline is April 15, 2026. Filing early can help you receive your refund sooner, though EITC/ACTC refunds are held until mid-February regardless of filing date.

Can I Claim the $6,000 Senior Deduction Even If I Don’t Itemize?

Yes! The $6,000 senior deduction (age 65+) for 2026 is available whether you take the standard deduction or itemize. This is different from traditional senior deductions that only applied to itemizers. You simply add the $6,000 to your other applicable deductions to arrive at your total deduction amount.

How Much Can I Contribute to a 2026 Solo 401(k) If I’m Self-Employed?

For 2026, Solo 401(k) limits increase dramatically: $72,000 for those under 50 years old, $80,000 for ages 50-59, and $83,250 for ages 60-63. These limits include both your employee deferrals (limited to $24,500) and employer profit-sharing contributions. Self-employed individuals should prioritize establishing a Solo 401(k) to maximize these higher limits immediately.

Will H.B. 124 and S.B. 163 Pass in Maryland in 2026?

While Maryland Gov. Wes Moore has committed to not including new taxes in the FY2027 budget, H.B. 124 and S.B. 163 represent tax relief, not tax increases. Passage is not guaranteed, as all legislation must clear committee hearings and floor votes. Monitor Maryland’s General Assembly website for updates on these bills as the 2026 legislative session progresses. We recommend planning conservatively without assuming these proposed deductions will pass.

Does the New Car Loan Interest Deduction Apply to My Vehicle Loan?

The car loan interest deduction has strict requirements. The vehicle must be manufactured in the United States, the loan must be for personal use (not business), and income phase-out limits apply. The deduction is temporary through 2027 and amounts are limited. Consult a tax professional to determine if your specific vehicle loan qualifies for this new deduction in 2026.

What’s the Deadline for Contributing to 2026 Retirement Accounts?

For 2026 401(k) contributions, the deadline is December 31, 2026. For 2026 IRA contributions (traditional or Roth), the deadline is April 15, 2027 (the tax filing deadline). For Solo 401(k) contributions for 2026, you generally have until December 31, 2026 for employee deferrals, though employer contributions may extend to your business tax filing deadline. Start contributing early in 2026 to spread contributions across the year and manage cash flow effectively.

How Does the Phase-Out for the Senior Deduction Work?

The $6,000 senior deduction (age 65+) begins phasing out when your Modified Adjusted Gross Income exceeds $75,000 (single) or $150,000 (married filing jointly). For every dollar your income exceeds these thresholds, you lose 6 cents of the deduction. The deduction completely phases out at $175,000 (single) or $250,000 (married filing jointly). Example: A single filer with $100,000 MAGI would have their $6,000 deduction reduced by $1,500 (25,000 excess × 0.06), leaving a $4,500 deduction.

Should I Worry About the IRS Workforce Reduction Affecting My 2026 Return?

The IRS workforce has decreased 26% due to attrition and buyouts, which the National Taxpayer Advocate warned could create processing delays for 2026 returns. While the IRS still expects to process most refunds within 21 days, allow extra time. File early, don’t rely on receiving refunds by a specific date, and maintain copies of all supporting documents. Consider e-filing, which processes faster than paper returns.

This information is current as of 1/14/2026. Tax laws change frequently. Verify updates with the IRS or consult a tax professional if reading this later in the year.

Last updated: January, 2026