Earned Income Tax Credit
If you qualify for the federal earned income tax credit and claim it on your federal return, you may be entitled to a Maryland earned income tax credit on the state return equal to 50 percent of the federal tax credit. The Maryland earned income tax credit will either reduce or eliminate the amount of the state and local income tax that you owe.
For tax year 2011, the earned income credit is allowed if you meet the following conditions:
- You have three or more qualifying children and you earn less than $43,998 ($49,078 if married filing jointly).
- You have two qualifying children and you earn less than $40,964 ($46,044 if married filing jointly).
- You have one qualifying child and you earn less than $36,052 ($41,132 if married filing jointly).
- You do not have a qualifying child and you earn less than $13,660 ($18,740 if married filing jointly).
To calculate the amount of your tax credit, complete the State Earned Income Credit Worksheet included in Instruction 18 of the Maryland tax booklet.
You may qualify for the Maryland earned income tax credit even if you’re not required to file a Maryland tax return. However, you must file a return to claim the state tax credit, using Form 502 or 503 (or Form 505 or 515 if you are a nonresident).
Refundable Earned Income Tax Credit
If the earned income tax credit exceeds your Maryland tax liability, you may be entitled to a refund. Complete the Refundable Earned Income Credit Worksheet in Instruction 21 of the tax booklet.
The refundable earned income credit is calculated as 25 percent of your federal earned income credit, less your state income tax liability. If this amount is zero or less, no refund is due. The refundable amount of the credit may not be carried forward to any other tax year.
Local Earned Income Tax Credit
If you are a Maryland resident who qualifies for the state earned income credit, you may also qualify for a local earned income tax credit. Complete the Local Earned Income Credit Worksheet included in Instruction 19 of the tax booklet. The unused local income tax credit may not be refunded or carried forward to any other tax year.
Nonresidents, part-year residents
Nonresidents and part-year residents must prorate their earned income credits on Form 505 or 515, based on the ratio of Maryland adjusted gross income to federal adjusted gross income.