Maryland Tax Rates

This post provides an overview of the primary taxes levied at the state level in Maryland. The information contained here is intended for general reference. For individuals or businesses seeking comprehensive support with tax filings, compliance, or strategic planning, indinero offers expert services. We encourage all who utilize this summary to explore the tailored tax support available through indinero.

Individual Income Tax

Maryland utilizes a graduated state individual income tax system with eight tax brackets. Crucially, it is one of the few states that also requires a separate local income tax payment.

  • State Rate: State income tax rates range from a low of 2.00% to a top marginal rate of 5.75%. The top rate applies to taxable income exceeding $250,000 for single filers ($300,000 for married couples filing jointly).
  • Local Income Tax (Piggyback Tax): All 23 counties and Baltimore City levy a local income tax (also called a “piggyback tax”) on residents’ taxable net income. These rates vary by jurisdiction, ranging from 2.25% to 3.20%. This local tax is filed and paid on the same form as the state income tax.
  • Total Maximum Rate: When combined, the maximum state and local income tax rate in Maryland can reach up to 8.95% (5.75% state + 3.20% local).
  • Retirement Income: Social Security benefits are not taxable in Maryland. The state also offers a substantial pension exclusion for qualifying residents aged 65 or older or who are totally disabled.

Sales and Use Tax

Sales tax is a significant source of state revenue, and Maryland maintains a uniform state rate without local additions.

  • State Rate: The general state sales tax rate is a uniform 6.0% on the retail sale of tangible personal property and certain specified services.
  • No Local Sales Tax: Maryland does not permit local, county, or municipal general sales taxes. Therefore, the combined sales tax rate is uniformly 6.0% across all jurisdictions.
  • Variable Rates: A higher rate of 9% is levied on alcoholic beverages. A rate of 11.5% applies to short-term passenger vehicle rentals.
  • Exemptions: Essential items like most groceries (unprepared food for home consumption) and prescription drugs are exempt from the 6.0% state sales tax.
  • Use Tax: A state use tax of 6.0% applies to taxable items purchased outside of Maryland but used, stored, or consumed in the state if state sales tax was not collected.

Property Tax (Ad Valorem Tax)

Property taxes in Maryland are levied at both the state and local levels, though the local portion is significantly higher.

  • Assessment: Real property is assessed at 100% of its market value every three years. Any increase in value is phased-in over the three-year reassessment cycle.
  • Tax Calculation: The tax is determined by applying the combined state and local property tax rates (expressed as dollars per $100 of assessed value). Local rates vary widely by county and city, with the effective rate often above the national average due to high property values.
  • Homestead Tax Credit: The state provides the Homestead Tax Credit, which limits the annual increase in the taxable assessment of a principal residence to a maximum of 10%, even if the market value rises higher.
  • Homeowners’ Property Tax Credit: An additional state credit is available for lower-income residents that caps property taxes based on income level.

Corporate Income Tax

Maryland imposes a tax on the net income of corporations derived from sources within the state.

  • Tax Rate: The corporate income tax rate is a flat 8.25% of the corporation’s Maryland taxable net income. This rate is one of the higher flat corporate tax rates in the nation.
  • No Franchise Tax: Maryland does not impose a corporate franchise tax or a gross receipts tax on manufacturers.
  • Apportionment: For multi-state corporations, Maryland generally uses a single sales factor apportionment method to determine the portion of income taxable in the state.

Unique Taxes: Estate and Inheritance Taxes

Maryland is one of the few states that imposes both an estate tax and an inheritance tax.

  • Estate Tax: The state imposes an estate tax on estates exceeding the state’s statutory exemption amount.
  • Inheritance Tax: This tax is levied on the recipient of inherited property. Direct relatives (spouses, children, parents, siblings) are exempt, but distant relatives and non-relatives are subject to a flat 10% rate.

R&D Offer Quiz

Step 1 of 3

Answer to find out if you're eligible for R&D tax credits.

Do the activities performed relate to a new or improved business component’s function, performance, reliability, quality, or composition?(Required)
For Example: A mid-sized packaging company develops a slightly modified cardboard box design to improve its stacking strength (reliability) for warehouse storage, involving minor adjustments to the corrugation pattern to reduce collapse under standard weight loads.
Is your company trying to discover information to eliminate uncertainty concerning the capability or method for developing or improving a business component?(Required)
For Example: A furniture manufacturer investigates whether a cheaper wood adhesive can hold joints as effectively as the current one during assembly, testing bond strength to resolve doubts about its capability in standard production lines.
Do the activities performed constitute a process of experimentation?(Required)
For Example: An auto parts supplier runs a series of bench tests on different lubricant formulations to find one that reduces friction in engine bearings more effectively, systematically comparing wear rates over simulated operating cycles.