State Taxes in Maryland: What Families Should Know
Understanding Maryland’s state taxes is important for families, since being aware of the rules (and the tax breaks you may qualify for) can make a meaningful difference in your finances.
Here’s a breakdown of the rules you should be aware of and how you could potentially lower your tax bill.
State Income Tax
Maryland uses a progressive income tax system with eight tax brackets ranging from 2.0% to 5.75% for most households.
The following rates are applicable to tax years beginning after December 31, 2024:
Taxpayers filing joint, head of household, or for qualifying widows/widowers:
Taxable Income | Maryland Tax Rate |
$1.00 to $1000 | 2% |
$1,001 to $2,000 | 3% |
$2,001 to $3,000 | 4% |
$3,001 to $150,000 | 4.75% |
$150,001 to $175,000 | 5% |
$175,001 to $225,000 | 5.25% |
$225,001 to $300,000 | 5.5% |
$300,001 to $600,000 | 5.75% |
$600,001 to $1.2 million | 6.25% |
Over $1.2 million | 6.5% |
Taxpayers filing as single, married filing separately, or as dependent taxpayers:
Taxable Income | Maryland Tax Rate |
$1.00 to $1000 | 2% |
$1,001 to $2,000 | 3% |
$2,001 to $3,000 | 4% |
$3,001 to $100,000 | 4.75% |
$100,001 to $125,000 | 5% |
$125,001 to $150,000 | 5.25% |
$150,001 to $250,000 | 5.5% |
$250,001 to $500,000 | 5.75% |
$500,000 to $1 million | 6.25% |
Over $1 million | 6.5% |
Local “Piggyback” Tax
Maryland’s counties, and the city of Baltimore, also charge a local income tax, which is added to your state tax bill.
For the 2025 tax year, these rates range from 2.25% to 3.3%, depending on your county of residence.
It’s important to note your local income tax is based on where you live, not where you work.
Property Tax
Property taxes vary by county.
Statewide, the average effective property tax rate is about 0.95% of your home’s assessed value.
And while Maryland does not offer a general homeowner’s exemption like some states, it does offer:
- Homestead Tax Credit: this limits how much your property tax assessment can increase each year, helping protect families from rising home values spiking their property taxes. The state cap is 10%, but many counties set lower caps.
- Homeowners’ Tax Credit: this program helps low- and moderate-income homeowners by limiting property taxes to a percentage of income. Renters may qualify for a similar renters’ tax credit if rent makes up a large share of income.
Sales Tax
Maryland charges a 6% sales tax statewide, with no additional local sales taxes.
Common exemptions include:
- Most groceries
- Prescription drugs
- Many medical supplies
- Diabetic supplies
- Some medical equipment
Retirement Income Tax
Maryland:
- Does NOT tax Social Security benefits
- Does tax IRA and 401(k) withdrawals
- Offers a pension exclusion (for retirees over 65) for eligible pensions, up to an annually adjusted amount
Many families supporting aging parents or planning for retirement benefit from knowing these rules.
Estate Tax
Maryland’s estate tax applies to estates exceeding $5 million (per individual) in 2025.
- Married couples may use portability to shield up to $10 million
- Tax rates range from 0.8% to 16%
Inheritance Tax
Maryland is the only state that imposes both an estate tax and an inheritance tax.
The inheritance tax is a flat 10%, but only for certain beneficiaries.
Exempt from the inheritance tax:
- Spouses
- Children & stepchildren
- Parents & grandparents
- Grandchildren & step-grandchildren
- Siblings
Subject to the 10% tax:
- Nieces and nephews
- Friends
- Unrelated heirs
- More distant relatives
If the estate’s total value does not exceed $50,000, no inheritance tax is imposed.
Standard Deduction & Personal Exemptions
For the 2025 tax year, the Maryland standard deduction is a flat amount determined by filing status, no longer based on a calculation of adjusted gross income.
- $6,700 for married filing jointly, head of household, or qualifying surviving spouse
- $3,350 for single filers, married filing separately, or dependent
Maryland also has personal exemptions, including for dependents, though these phase out at higher incomes.
Child Tax Credit
The child tax credit is a $500 tax credit that helps parents cover the costs of raising kids by reducing the taxes they owe or increasing their refund.
Maryland offers a $500 credit per qualifying child, but eligibility is limited:
- You have a qualifying dependent who is:
- under the age of 6, or
- under the age of 17 with a disability
- Your federal AGI must be $15,000 or less to receive the full $500 per child credit
- You may be eligible for a reduced credit if your AGI is between $15,001 and $24,000.
This credit is refundable, meaning you can get money back even if you owe no tax.
Child and Dependent Care Tax Breaks
You can claim two separate tax breaks for child or dependent care costs on your Maryland return:
- State tax deduction
- Up to $3,000 for one dependent
- Up to $6,000 for two or more
- Child & Dependent Care Tax Credit
- If you were eligible for the federal tax credit for child and dependent care, you may be entitled to a credit on your Maryland state income tax return.
- Worth 20% to 35% of qualifying expenses, depending on income. Expenses must be necessary so that you, and your spouse, if filing jointly, can work or look for work.
Two-Income Married Couple Subtraction
If both spouses have taxable income and file a joint return, you may be able to subtract up to $1,200 (or the income of the lower-earning spouse, whichever is less) from your state taxable income.
Education Savings
Maryland encourages saving for future education costs.
Contributions to the Maryland Prepaid College Trust or the Maryland Broker-Dealer Investment Plan (529 plan) may be eligible for a state deduction of up to $2,500 per beneficiary per year.
Other Maryland Tax Benefits Families Should Know
529 ABLE Accounts (for individuals with disabilities)
Contributions to a Maryland ABLE account may also receive a state deduction (similar to 529 college savings rules).
Commuter Tax Benefits
Maryland offers specific credits to employers who subsidize transit benefits, helpful for families advocating through their employer.
Energy Efficiency Credits
Maryland occasionally offers state-level incentives for energy-efficient updates (e.g., heat pumps, insulation).
These change periodically but can significantly reduce out-of-pocket costs.
How Milestones Financial Is Here to Help
Maryland’s tax rules can be complex, but you don’t have to navigate them alone.
At Milestones Financial, we help families understand their options, reduce their tax burden, and make confident decisions around saving, retirement, and estate planning.
*Please keep in mind that each situation is unique and tax rules may change. If you have further questions, please feel free to email us. If you have questions that are tax specific, we encourage you to contact your CPA/tax preparer. Clients should consult with a qualified financial, tax, or legal professional regarding their individual situation prior to purchasing any financial product
