Navigating Maryland’s New Tax Law Changes: Your Questions, Answered

As a taxpayer, it’s essential that you understand the new tax law changes in Maryland’s Budget Reconciliation and Financing Act (BRFA) of 2025, effective July 1, 2025, and how you’re impacted.

To help Maryland taxpayers prepare for these changes, we hosted a live webinar to provide guidance on how BRFA’s tax provisions affect business owners and individuals. You can watch the webinar recording below. 

In this blog post, we’ve compiled questions asked during the webinar — and our answers — to help you navigate the tax law changes.

Section 179 excludes certain business property from the Maryland surtax. What types of assets does that refer to?

Section 179 property refers to assets that are eligible for the §179 depreciation deduction, which allows taxpayers to potentially expense the entire cost of an asset in the year it was purchased.

Assets that fall under this definition are cars, trucks, equipment and furniture, among many others. Generally, most personal property that businesses use is eligible for §179. Therefore, any gains from the sales of these assets will be exempt from the new legislation.

Do you still get the same state and local tax (SALT) deductions on the federal side even if your itemized deductions are limited on the state side?

Before BRFA, a taxpayer was limited to only taking sales tax, personal property tax and real estate taxes for their SALT portion of itemized deductions. They were not allowed to use state income tax payments or withholdings for their Maryland state and local tax deduction for itemized deductions. This does not change under the new BRFA provision. The new 7.5% itemized deduction phase-out on income over $200,000 applies independently of this calculation.

If the tax bracketed joint filing is $1-600,000 at 5.75%, are any additional earnings in the next tax bracket? Let’s say the earnings are a total of $700,000. Is only the additional $100,000 taxed at 6.25%, or is it the total taxed at the higher bracket?

The new tax rates only apply to income that is over the previous tax bracket limitation.

If the taxpayer had $700,000 of Maryland taxable income, only the $100,000 over the $600,000 bracket limit would be taxed at the 6.25% rate. The initial $600,000 would be taxed at the various lower rates in their respective brackets.

Does the Maryland sales tax on data and IT services apply to income generated from those technology services?

The tax is charged to the customer of the company providing the technology service or license. It is not an income tax or calculated against any company’s income in or outside Maryland.

Is an IT company outside of Maryland that invoices us (a company in Maryland), required to add the surcharge?

The IT service provider outside of Maryland should review the nexus standard for their business. Maryland has provided the following standard for remote sellers:

Remote seller (no physical presence in Maryland) selling to a Maryland buyer – seller must collect if, during the previous calendar year or the current calendar year, the vendor meets the following criteria:

• Gross revenue from the sale of tangible personal property or taxable services delivered into Maryland exceeds $100,000; or
• Makes sales of tangible personal property or taxable services for delivery into Maryland in 200 or more separate transactions. Anyone purchasing taxable services or products in Maryland from a non-Maryland seller should remit the use tax on the product or service if the non-Maryland seller does not charge the tax.

We own our vending machine and fill it with items from an outside retailer. We pay sales tax to the retailer on the items. Do we have to charge sales tax when we sell the items from the machine since the tax has already been paid?

If you are purchasing from the retailer and are required to collect sales tax at the vending machine, you should apply for a resale certificate through the state. The state does not want you to pay sales tax on an item more than once. Only the final purchaser should be paying sales tax.

Note: Resale certificates may not be used to make tax-free purchases for resale if the purchase is less than $200 and payment is by cash, check or credit card (unless the seller delivers the goods directly to the buyer's retail place of business).

Will the standard deduction be phased out over a period of time?

No, under the BRFA there is no expiration on the increased standard deduction.

If a company provides help desk services, does the 3% tech tax still apply?

Yes, IT help desk services fall under the NAICS 5415 sector and subsector defined as taxable under the new provision.

Will iCloud monthly bills have the 3% tech tax added?

Yes, iCloud services are subject to the IT tax as they fall under NAICS code 518, which is defined as a taxable service under the new provision.

If I sign a year-long contract with an IT service provider today, but they bill me monthly, will I owe the 3% on future billings?

If the agreement allows you to cancel service any month during the year with no further liability, then the monthly payments are considered a subscription and each payment/invoice period that is paid or billed monthly will be seen as a separate sale. As a result, any invoices received after the July 1, 2025, BFRA effective date are taxable.

Need Help?

Have additional questions about how the new tax law changes will affect you? Contact us here or call 800.899.4623.