Introduction
Running a small business in Maryland comes with plenty of challenges. Taxes are often at the top of the list.
It is possible that, as a Maryland business owner, you might be paying more in taxes than you need to. This could simply be because you are not aware of the deductions, credits, and planning strategies available to you.
This guide will try to walk you through 5 smart, fully verified tax-saving tips for small businesses in Maryland.
They are based on current 2025 federal and state rules, so you can feel confident applying them to your own business or discussing them with your accountant.
Tip 1: Maximize State Tax Credits in Maryland
Maryland is known to offer several state-level tax credits that are designed to reward job creation, economic development, and innovation.
Sadly, there are many small business owners who either don’t know about them or assume they’re only for large corporations.
Three key Maryland tax credits to know:
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Job Creation Tax Credit (JCTC)
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Worth $3,000 per new full-time job created.
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In certain revitalization areas, that jumps to $5,000 per job.
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Eligible industries and minimum job thresholds apply.
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You must apply within specific timeframes after creating the jobs.
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One Maryland Project Tax Credit
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Available to businesses in specific counties (Tier 1 or distressed areas).
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Can be worth up to $5 million in credits, depending on jobs created and project costs.
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Designed to encourage expansion in economically challenged locations.
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Research and Development (R&D) Tax Credit
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Available for Maryland-based R&D expenses.
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The annual application deadline is November 15 for the prior year’s activities.
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Great for technology, biotech, and manufacturing companies investing in innovation.
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A manufacturing firm in Hagerstown added four qualifying full-time jobs in a revitalization area. Under the JCTC, this addition meant $20,000 in credits ($5,000 per job) applied to their Maryland income tax liability.
You can visit the official Maryland Business Tax Credits page to identify credits that match your industry and location and mark application deadlines in your calendar.
Tip 2: Understand the Qualified Business Income (QBI) Deduction
The QBI deduction (Section 199A) is a federal tax benefit that allows eligible business owners to deduct up to 20% of their qualified business income.
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Applies to sole proprietorships, partnerships, and S corporations.
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Subject to income thresholds, business type restrictions, and wage/property limits.
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Does not reduce Maryland state income tax for most individuals because Maryland starts with federal adjusted gross income (AGI), and QBI is a below-the-line deduction.
QBI may not lower your Maryland state tax, but it can save you thousands at the federal level, thereby freeing up more cash to reinvest in your business.
For instance, a freelance marketing consultant in Bethesda earned $100,000 in qualified business income.
Under QBI, they could deduct $20,000 from their federal taxable income, resulting in roughly $4,400 in federal tax savings. This is based on a 22% marginal rate.
Talk to a CPA today to confirm if you qualify for QBI and how it interacts with your federal and Maryland returns.
Tip 3: Organize Your Expenses Monthly
One of the simplest and most overlooked ways to lower your tax bill is good old recordkeeping.
If you wait until tax season to sort receipts, you might risk missing deductions you’re entitled to. Endeavor to track your expenses monthly so they’re ready for your accountant and are fully documented.
Common small business deductions (federally and in Maryland):
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Home office expenses: This is when a part of your home is used exclusively and regularly for business.
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Business mileage: The IRS rate for 2025 is 70¢ per mile.
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Internet and phone costs: Occurs when used for business.
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Professional development: These include courses, seminars, and industry certifications.
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Office supplies and software: Here, even cloud subscriptions can count.
Note on Maryland-specific rules:
Maryland generally follows federal treatment for business expenses, so anything deductible federally will usually reduce your Maryland taxable income as well.
A small web design studio in Annapolis tracked all client-related driving for a year, totaling 3,000 business miles. At 70¢ per mile, that meant a $2,100 deduction. This in turn reduced both their federal and Maryland taxable income.
You can use a simple system like QuickBooks, FreshBooks, or even an Excel spreadsheet to record expenses at the end of each month. Recordkeeping always comes in handy.
Tip 4: Stay on Top of Estimated Quarterly Taxes
Paying taxes once a year may seem easier, but the IRS and Maryland expect many small business owners to make quarterly estimated tax payments.
Federal requirement:
If you expect to owe $1,000 or more in tax for the year, you must make quarterly payments to avoid penalties.
Maryland requirement:
If you expect to owe $500 or more in Maryland state income tax, you must make quarterly payments to the state.
Quarterly due dates for both:
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April 15
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June 15
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September 15
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January 15 (of the following year)
For example, a café owner in Columbia realized they owed $1,200 in Maryland income tax after their first year. By making timely quarterly payments the following year, they avoided $250 in penalties and interest.
It would help you a lot if you marked these dates in your phone’s calendar and set reminders. Some accounting software can also schedule alerts.
Tip 5: Work with a Maryland-Based Accountant
Tax laws, such as credits and deductions, change regularly. Maryland has several state-specific rules and deadlines that can be easy to miss.
Benefits of hiring a local accountant:
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Knows Maryland tax incentives and can easily flag opportunities you didn’t know existed.
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Understands local compliance rules so as to avoid penalties for missed filings or misapplied credits.
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Tailored advice culminating in strategies that work for businesses in your county or city.
A boutique retail store in Baltimore hired a local CPA who discovered they were eligible for the Enterprise Zone income tax credit based on their location. Apparently, the owners had never heard of it. That one discovery saved them $8,000 over two years.
Choose an accountant familiar with both federal and Maryland small business tax law, and meet with them at least twice a year
- mid-year for planning, and
- at year-end for preparation.
Conclusion
Saving on taxes is all about using the rules to your advantage. By applying these Maryland-specific strategies and staying proactive, you can keep more of your profits and put them toward growing your business.
Need help applying these tips? Contact Aso Financial today for a free consultation and start saving smarter.