Maryland Excess Credit Carryover
When filing Maryland state taxes, businesses and individuals may claim various tax credits. However, if the total credits claimed exceed the amount of Maryland state income tax owed, the excess credit can be carried over to future tax years. This is known as an excess credit carryover.
How Excess Credit Carryover Works
- Excess credits are those that cannot be fully used in the current tax year because they exceed the taxpayer’s Maryland income tax liability.
- The carryover is allowed for certain business income tax credits and is subject to a five-year expiration period.
- Carryover amounts must be reported on the appropriate form, typically Form 500CR for businesses or Form 502CR for individuals.
Reporting Excess Carryover Credits
- For businesses, enter the carryover of excess credits from the previous year on line 21 of Form 500CR. This amount comes from line 7, Part BBB of the prior year’s Form 500CR (2024).
- For individuals, the Endow Maryland Income Tax Credit carryover is reported on line 1 of Form 502CR.
- The total tentative credit (including carryover) is calculated by adding the current year’s credits to the carryover amount and then subtracting any recaptured credits.
Important Notes
- Excess credits are not refundable and can only be applied against Maryland state income tax.
- The carryover period is limited to five years from the year the credit was earned.
- Certain credits, such as those from Parts A, C, J-I, K-I, K-II, V, and BB of Form 500CR, require an addition to income. These additions are reported on line 7f of Form 500, line 5 of Form 502, or line 19 of Form 505.
Source:
Form 502CR
Disclaimer: Always verify information with official Federal or State Department of Revenue Forms and Instructions.