Episode 118: New Bill, New Breaks: What Families and Investors Should Know

In this episode:

• The benefits of long-term capital gains tax rates and how to qualify

• The impact of the 3.8% Net Investment Income Tax (often called the “Obamacare tax”)

• The key differences between long-term and short-term capital gains

• New increases to the standard deduction for 2025

• A proposed tax-advantaged “Trump Account” for children under age 8, including contribution limits and withdrawal rules

• The House-passed bill’s broader context, including its 100+ tax provisions still awaiting Senate approval

• Why it's important to wait for legislation to be finalized before planning around it

In this episode, our guest, Debora Gorman, dives into Maryland’s sweeping tax changes for 2025, aimed at closing a $3.3 billion budget gap—while giving entrepreneurs a crash course in how these changes will hit their bottom lines. If you own or operate a business in Maryland (or sell into it), this is your cheat sheet to staying compliant and tax-savvy in the face of some major shifts.

What You’ll Learn:

• New High-Income Tax Brackets:
  Maryland has introduced two new tax tiers for top earners—up to 6.5% for individuals making over $1 million and joint filers over $1.2 million. Business owners should reassess employee withholdings and estimated tax payments now.

• Capital Gains Surtax:
  A new 2% surtax applies to net capital gains for individuals with federal AGI over $350,000. Some exceptions apply (think retirement accounts and primary residences under $1.5M), but high-income entrepreneurs will want to revisit their investment strategies and tax planning.

• Standard Deduction Boosts:
  Maryland has raised its standard deduction significantly. It could tip the scales for some taxpayers, especially small business owners juggling itemized deductions. Gorman urges entrepreneurs to run both scenarios before filing.

• New 3% Sales Tax on Digital & IT Services:
  Starting July 1, 2025, certain digital subscriptions and tech services will be taxed. This includes cloud storage, custom software, and IT consulting under specific NAICS codes. If you’re selling these services, you’ll need to start collecting and remitting the tax. If you’re buying, plan for increased costs.

• Out-of-State Sellers Beware:
  If your company sells into Maryland and hits $100K in revenue or 200 transactions/year, you’re likely on the hook for sales tax collection—even without a physical presence.

• Custom Software No Longer Exempt:
  With the expansion of what’s taxable, the custom software exemption is gone. If it’s tied to taxable IT services, it’s now subject to the 3% rate.

• Help Is Available:
  Gorman highlights resources like MarylandTaxConnect.gov and the Comptroller’s legislative updates page, which includes step-by-step videos, withholding calculators, and FAQs. Bonus: There’s no underpayment penalty for 2025 if your miscalculation is due to the new rates.

This episode delivers exactly what every entrepreneur needs: clarity, direction, and tools to stay ahead of the changes—without the legalese. Stay sharp and compliant, Maryland business owners. July’s coming fast.