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Read. Follow. Verify.Maryland Creates State Income Tax Credit for Retirement Account Early Withdrawal Penalties Caused by Financial Exploitation
Last action · January 22, 2026: Hearing 2/03 at 2:00 p.m.Sponsor: Jack Bailey
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What This Bill Would Do
Maryland establishes a state income tax credit for eligible taxpayers who face state income taxes and federal penalties for early retirement fund withdrawals resulting from , effective July 1, 2026. The credit is capped at the lesser of the state income tax attributable to the withdrawal or the federal tax penalties paid under § 72(t) of the Internal Revenue Code. Taxpayers must provide documentation from Adult Protective Services, law enforcement, a financial institution, or a court, along with an affidavit attesting to the penalties incurred.
Taxpayers who withdraw retirement funds early due to can offset state income taxes and federal penalties up to the lesser of those two amounts, though unused credit amounts cannot be carried over to future tax years.
- Senate Bill 291 was introduced in the Maryland General Assembly during the 2026 regular session by Senator Bailey. context
- Section 72(t) of the Internal Revenue Code imposes a 10% additional tax on early distributions from qualified retirement plans unless an exception applies. context
Who It Would Affect
Groups the bill's text would affect if enacted, as described in the record. Being affected is not a position for or against it.
Eligible taxpayers subject to early withdrawal penalties
Taxpayers who incurred early withdrawal penalties due to financial exploitation may claim a credit against their State income tax.
Susceptible adults and older adults
The legislation utilizes definitions of financial exploitation and susceptible adults to establish eligibility parameters for victims seeking tax relief.
Key Facts
- Eligible taxpayers can claim a State income tax credit equal to the lesser of the State income tax attributable to an early retirement withdrawal due to financial exploitation or the federal tax penalties paid under § 72(t) of the Internal Revenue Code.
- To claim the credit, taxpayers must provide documentation of loss from Adult Protective Services, a law enforcement agency, a financial institution reporting under the Maryland Statute Against Financial Exploitation (SAFE) Act, or a court order or related document.
- Taxpayers claiming the credit must also submit an affidavit attesting that federal tax penalties were incurred as a result of early withdrawal of retirement funds due to financial exploitation.
- Any unused amount of the tax credit cannot be carried over to any other taxable year.
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- Financial exploitation is defined to include unauthorized taking of assets, breach of a fiduciary relationship, deception, or taking advantage of an adult lacking capacity to consent.
- A susceptible adult is defined as an individual unable to perform one or more activities of daily living without prompting or assistance, unable to protect rights, or having diminished executive functioning due to advanced age, disability, impaired mobility, addiction, or hospitalization.
- The Act takes effect July 1, 2026, and applies to all taxable years beginning after December 31, 2025.
Frequently Asked Questions
Who is eligible to claim the tax credit?
What documentation is required to claim the tax credit?
Can unused tax credits be carried over to future years?
What else do you want to know?
News Coverage
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Votes, people, money & the original sourceWhere This Stands
Currently filed. The next step in the legislative lifecycle is Committee.
Procedural history
2 actions- Jan 22, 2026SenateHearing 2/03 at 2:00 p.m.
- Jan 21, 2026SenateIntroducedFirst Reading Budget and Taxation
Version history
Only one version on file - nothing to compare yet. As later stages (committee substitute, engrossed, enrolled) are captured, the redline appears here.
View official text →Lobbying Activity
No state lobbying filings in our records match this bill. Federal lobbying reports (LDA) cover Congress, so they are not listed on state bills.
Full breakdown
Who this bill affects and the strongest case for and against it, written only from the bill’s own text.
Sponsors
Connected Entities
Sources
mgaleg.maryland.gov
Analysis Score
0–100- Significance60How much this matters to a regular citizen
- Controversy10Intensity of disagreement among stakeholders
- Entertainment5Compellingness for a non-policy-wonk reader
- Buzz25Current news / social attention level
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