Federal tax law changes often dominate the headlines, but don’t overlook what happens at the state level. Maryland made several changes during its 2026 legislative session that could affect your state tax return, while Pennsylvania and West Virginia continue to expand tax benefits for many residents.
Perhaps the biggest headline, however, is what didn’t happen.
Maryland Did NOT Follow the Federal “No Tax” Trend
Although legislation was introduced in Maryland to exempt tips and overtime pay from Maryland income tax—similar to recent federal changes—those proposals did not pass.
That means if your tips or overtime qualify for favorable federal tax treatment, they may still be taxable on your Maryland return. It’s an important reminder that federal and state tax laws don’t always match, and taxpayers shouldn’t assume a federal tax break automatically applies to their state return.
New Maryland Tax Benefits
Maryland lawmakers did approve several targeted tax changes for the upcoming filing season, including:
- Expanding the classroom supply deduction to include eligible pre-kindergarten teachers.
- Broadening the retirement income subtraction to include retired Washington D.C. fire, rescue, and EMS personnel.
- Expanding deductible farm equipment provisions for qualifying agricultural businesses.
- Making the Student Loan Debt Relief Tax Credit more taxpayer-friendly by easing certain repayment requirements.
- Updating veteran-related tax provisions to recognize members of the U.S. Space Force.
- Extending several business incentive programs under the DECADE Act.
While these changes may not affect every taxpayer, they demonstrate Maryland’s continued focus on targeted relief rather than broad-based tax exemptions.
Don’t Overlook These Existing Maryland Tax Breaks
Sometimes the best tax savings aren’t new at all.
First-Time Homebuyer Savings Account
Maryland continues to offer one of the more generous first-time homebuyer programs in the region. Eligible taxpayers can subtract up to $5,000 annually in contributions, plus qualifying investment earnings, for up to ten years when saving for the purchase of a Maryland home. Married couples may each qualify for the subtraction if eligibility requirements are met.
Student Loan Debt Relief Tax Credit
If you’re carrying student loan debt, don’t miss this opportunity. Applications for the 2026 Student Loan Debt Relief tax credit are accepted July 1 through September 15, 2026. Eligible recipients can receive state assistance that must be applied toward qualifying student loans. Apply via Maryland OneStop.
Venison Donation Credit
Maryland also continues its unique tax credit for hunters who donate processed venison to qualifying charitable organizations. Eligible taxpayers may receive a credit of up to $75 per deer, with a maximum annual credit of $300.
Pennsylvania Highlights
Pennsylvania introduced its new Working Pennsylvanians Tax Credit, a refundable credit equal to 10% of the federal Earned Income Tax Credit (EITC). Eligible taxpayers automatically qualify if they qualify for the federal EITC.
Pennsylvania also continues to offer:
- A Child and Dependent Care Enhancement Tax Credit tied to the federal credit.
- No state income tax on Social Security benefits, pensions, IRAs, or 401(k) distributions.
- One of the country’s more generous 529 plan deductions—up to $17,000 per beneficiary ($34,000 for married couples filing jointly).
West Virginia Continues Cutting Taxes
West Virginia has continued reducing its income tax burden while expanding taxpayer benefits.
Two of the biggest advantages include:
- The refundable Motor Vehicle Property Tax Adjustment Credit, which effectively reimburses many taxpayers for personal property taxes paid on their vehicles.
- Beginning in 2026, 100% of Social Security benefits are exempt from West Virginia income tax regardless of income.
The Bottom Line
Every year brings changes to the tax code, but not all of them make national headlines.
Maryland taxpayers should be aware that the state decided not to adopt the federal “No Tax on Tips” or “No Tax on Overtime” provisions. However, it is wise to take advantage of the valuable state-specific deductions and credits that remain available.
Whether you’re buying your first home, paying off student loans, saving for college, or simply preparing your annual return, understanding your state’s tax rules can help you keep more of what you earn.
As always, if you’re unsure which state tax benefits apply to your situation, a little planning before you file can make a meaningful difference.
For help, contact Saunders Tax & Accounting at http://www.saunderstax.com or call us at 301-714-2071. Open Monday – Thursday, 9 am to 5 pm. Awarded the Hagerstown Hot List 2026 and Hagerstown Chamber of Commerce “2023 Small Business of the Year” by providing a Less Taxing Life and More Prosperous Solutions since 1984!
