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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4167
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi, I would like to know what is difference in income taxes

Resolved Question:

Hi, I would like to know what is difference in income taxes between Va and Md? Where it is more convenient to stablish residency to save in taxes? Please also give me the tax rates for both states. Thank you.
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Lane :

As you might expect... a lot depends on your income LEVEL ... let me just give you the data, and the we can go from there

Lane :

Maryland:

Lane :

Tax Rate Range: Low – 2%; High – 5.5%; Maryland’s 23 counties and Baltimore City may levy an income tax ranging from 1.25% to 3.15% of taxable income. Click here for local rates.
Income Brackets: Lowest – $1,000; Highest – $1,000,000
Number of Brackets: 7
Personal Exemptions: Single – $3,200; Married – $6,400; Dependents – $3,200. For more information click here.
Additional Exemptions: If you or your spouse is 65 or older or blind, you are entitled to an extra $1,000 personal exemption, in addition to the regular personal exemption that you may be entitled to. If you have a federal adjusted gross income of up to $100,000 (up to $150,000 if filing jointly) you are entitled to a $3,200 exemption on the Maryland return for each exemption you are qualified to claim on the federal return.
Standard Deduction: $1,500 or 15% of Maryland adjusted gross income to maximum of $2,000 for single returns; $3,000 up to $4,000 for married filing jointly.

Lane :

Virginai:

Lane :

Tax Rate Range: Low – 2.0%; High – 5.75%
Income Brackets: Lowest – $3,000; Highest – $17,000
Number of Brackets: 4
Personal Exemptions: Single – $930; Married – $1,860; Dependents – $930 Does not include exemptions for age or blindness.
Standard Deduction: Single – $3,000; Married filing jointly – $6,000

Lane :

TO be a little more specific on the brackets here's VA:

Lane :



















How Virginia Tax is Calculated
Va Taxable IncomeTax Calculation
0 - $3,0002%
$3,001 - $5,000$60 + 3% of excess over $3,000
$5,001 - $17,000$120 + 5% of excess over $5,000
$17,001 -$720 + 5.75% of excess over $17,000

 



Example


If your taxable income is $54,000, your tax is $720 + 5.75% of the amount over $17,000.


This equals: $720 + (.0575 x $37,000) = $720 + $2,127.50 = $2,847.50 which should be rounded to $2,848.


 


Lane :

And here's Maryland:

Lane :


































Tax Bracket (Single)Marginal Tax Rate
$0+2.00%
$1,000+3.00%
$2,000+4.00%
$3,000+4.75%
$150,000+5.00%
$300,000+5.25%
$500,000+5.50%




































Tax Bracket (Couple)Marginal Tax Rate
$0+2.00%
$1,000+3.00%
$2,000+4.00%
$3,000+4.75%
$150,000+5.00%
$300,000+5.25%
$500,000+5.50%

Lane :

This site also includes the local county atxes by county in Maryland: http://www.choosemaryland.org/factsstats/Pages/PersonalIncome.aspx

Lane :

And finally, here's an excellent article that digs into it pretty well (MD vs VA) and shows how the income level and other factors change the decision: http://voices.washingtonpost.com/rawfisher/2008/01/who_pays_more_taxes_virginia_m.html

Lane :

For example,


A new comparison of the tax burdens in the D.C. area reveals that the stereotype of tax-loving District bureaucrats hoovering up residents' riches is true for the lowest income level--the $25,000 a year family indeed faces a greater burden in Washington than in suburban Maryland or Virginia.


But at the $50,000 income level, the District turns out to have the lowest tax burden of the three jurisdictions, and for the next three higher income brackets--families earning $75,000, $100,000 or $150,000 a year--the District lands pretty much in the middle, ranking third among six area jurisdictions.


 

Lane :

Ah I see you're typing I'll wait

Customer: Income comes from self employment. About 60k. Where will it be better to establish residency?
Lane :

OK just a sec...

Lane :

Single or joint?

Customer: Single
Lane :

in VA that puts you at 4170

Lane :

MD you're at 2550

Lane :

SO much more is taxed n VA at the highest bracket

Lane :

in VA you're at 5.75% over 17000 ... in MD you're at 4.75 from 3000 to 150000

Lane :

Let me use a quick model to make sure we've taken any state deduction into account

Lane :
Tax Calculator Results
Full Size Image

My Tax-Rates.org Income Tax Estimate


Federal & Maryland State Income Tax - Tax Year 2012




















Income Tax Calculations
Maryland

Federal
Gross Income$60,000.00$60,000.00
Deductions for AGI($0.00)($0.00)










Adjusted Gross Income (AGI)$60,000.00$60,000.00

























Deductions and Personal Exemptions
Standard Deduction (Single)($2,000.00)($5,950.00)
Personal Exemption (One dependant)($0.00)($3,800.00)
Personal Exemption (One filer exemption)($3,200.00)($0.00)










Taxable Income$54,800.00$50,250.00


























Federal Income TaxShow Calculations $8,592.50
Maryland Income TaxShow Calculations$2,550.50


































Tax BracketCalculationMarginal Tax
0.$0.00+$1,000.00 × 2%$20.00
1.$1,000.00+$1,000.00 × 3%$30.00
2.$2,000.00+$1,000.00 × 4%$40.00
3.$3,000.00+$51,800.00 × 4.75%$2,460.50

Additional TaxesN/AN/A










Gross Tax$2,550.50$8,592.50











Tax Credits & PaymentsN/AN/A










Owed Tax$2,550.50$8,592.50

Lane :

Federal & Virginia State Income Tax - Tax Year 2012




















Income Tax Calculations
Virginia

Federal
Gross Income$60,000.00$60,000.00
Deductions for AGI($0.00)($0.00)










Adjusted Gross Income (AGI)$60,000.00$60,000.00

























Deductions and Personal Exemptions
Standard Deduction (Single)($3,000.00)($5,950.00)
Personal Exemption (One dependant)($0.00)($3,800.00)
Personal Exemption (One filer exemption)($930.00)($0.00)










Taxable Income$56,070.00$50,250.00


























Federal Income TaxShow Calculations $8,592.50
Virginia Income TaxShow Calculations$2,966.53


































Tax BracketCalculationMarginal Tax
0.$0.00+$3,000.00 × 2%$60.00
1.$3,000.00+$2,000.00 × 3%$60.00
2.$5,000.00+$12,000.00 × 5%$600.00
3.$17,000.00+$39,070.00 × 5.75%$2,246.53

Additional TaxesN/AN/A










Gross Tax$2,966.53$8,592.50











Tax Credits & PaymentsN/AN/A










Owed Tax$2,966.53$8,592.50

Lane :

Sorry the formatting was atrocious when pasted in , BotXXXXX XXXXXne the numbers are not as different as you might think from just looking at the tax tables

Lane :

Let me see if I can paste this to a table and the get it it here for you ... but basically, entering 60000 as the income, with the default standard deduction and exemption for both states VA is 2966 and MD is 2550 .... If you can hang on a minute, I'll show you the calculation

Lane :

Here's the comparison:

Lane :










































































MARYLAND
Tax BracketCalculationMarginal Tax
0$0.00+$1,000.00 × 2%20
1$1,000.00+$1,000.00 × 3%30
2$2,000.00+$1,000.00 × 4%40
3$3,000.00+$51,800.00 × 4.75%2460.50
Totaling:2550.5
VIRGINIA
ax BracketCalculationMarginal Tax
0$0.00+$3,000.00 × 2%$60.00
1$3,000.00+$2,000.00 × 3%$60.00
2$5,000.00+$12,000.00 × 5%$600.00
3$17,000.00+$39,070.00 × 5.75%$2,246.53
Totaling:2966.53
Lane :

HERE'S THE MODEL IF YOU'D LIKE TO PLAY AROUND WITH THE NUMBERS (different income levels, etc) http://www.tax-rates.org/maryland/income-tax and http://www.tax-rates.org/virginia/income-tax

Lane :

Let me know if I can help further

Lane :

Lane

Lane :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.


HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

Lane :

I still don't see you coming back into the chat here ... I'll move us to the "Question & Answer" mode ... maybe that will help

Lane :

Let me know if you ave further questions

Lane :

Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4167
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

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Expert:  Lane replied 1 year ago.


Sorry the formatting was so bad, but as you can see in that last section, not a huge difference

And again, you may want to use the models to see how that might change for different income levels

http://www.tax-rates.org/maryland/income-tax

http://www.tax-rates.org/virginia/income-tax


Lane

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4167
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.
Thanks much

Lane

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