Tax in Maryland: a complete guide
Like every state, Maryland has unique tax rules, advantages and disadvantages and includes no fewer than eight tax brackets for assessing and collecting income tax. Our guide closely examines each key taxation area to help you get a complete picture.
Regarding taxation rates, Maryland is not overly expensive, ranking 46th overall in the Tax Foundation’s 2023 State Business Tax Climate Index. But looking a little closer, the state’s cost of living is 21 percent higher than the national average. Housing is particularly pricey, being 56 percent higher.
Tax is a big part of the cost-of-living story, of course, and here the news is better, with a mixture of pros and cons.
Maryland income tax
As a taxpaying US citizen, you must follow federal tax laws in whichever state you live in. As of 2023, there are seven different income tax brackets that determine what you owe each year.
In some states, that would be the end of the income tax story, but in Maryland, state income tax is collected at rates between two and 5.75 percent, using a series of eight tax brackets.
Our tables show you the Maryland income tax ranges:
Tax table for single filers, married filing, filing separately or dependent taxpayers
| Up to $1,000 | Two percent |
|---|---|
| Up to $1,000 | Two percent |
| $1,001 to $2,000 | $20 plus three percent of the amount over $1,000 |
| $2,001 to $3,000 | $50 plus four percent of the amount over $2,000 |
| $3,001 to $100,000 | $90 plus 4.75 percent of the amount over $3,000 |
| $100,001 to $125,000 | $4,697.50 plus five percent of the amount over $100,000 |
| $125,001 to $150,000 | $5,947.50 plus 5.25 percent of the amount over $125,000 |
| $150,001 to $250,000 | $7,260 plus 5.5 percent of the amount over $150,000 |
| More than $250,000 | $12,760 plus 5.75 percent of the amount over $250,000 |
Tax table for joint filers, head of household and qualifying widows or widowers
| Up to $1,000 | Two percent |
|---|---|
| Up to $1,000 | Two percent |
| $1,001 to $2,000 | $20 plus three percent of the amount over $1,000 |
| $2,001 to $3,000 | $50 plus four percent of the amount over $2,000 |
| $3,001 to $150,000 | $90 plus 4.75 percent of the amount over $3,000 |
| $150,001 to $175,000 | $7,072.50 plus five percent of the amount over $150,000 |
| $175,001 to $225,000 | $8,322.50 plus 5.25 percent of the amount over $175,000 |
| $225,001 to $300,000 | $10,947.50 plus 5.5 percent of the amount over $225,000 |
| More than $300,000 | $15,072.50 plus 5.75 percent of the amount over $300,000 |
In some areas of Maryland, local income taxes may also apply.
Maryland sales tax
The sales tax rate in Maryland is six percent, and to simplify things, there are no general local sales taxes to work into your calculations. The state does add a six percent tax to tax-free purchases made out of state, which you must report and pay through the use tax return.
Alcohol and tobacco taxes help to give context to the sales tax picture. Here are some examples:
Cigarettes—$3.75 per pack
Other tobacco products—usually 53 percent of the wholesale price
Vapor products—12 to 60 percent of the wholesale price
Beer—$0.09 per gallon
Wine—$0.40 per gallon
Liquor—$1.50 per gallon
Alcohol sales are all subject to a nine percent tax rate.
Plenty of goods and services are free from sales tax, including clothing and footwear up to $100. Some organizations, such as non-profit charities and educational and religious establishments, qualify for sales tax exemption certificates.
Maryland also runs a yearly tax-free week, usually associated with back-to-school shopping, but shoppers of all ages can enjoy the tax-free savings. In 2023, tax-free week ran between August 13 —19.
Maryland property tax
The average property tax in Maryland is 1.06 percent – just over the national average. Actual rates vary widely because the state imposes no restrictions. This leaves cities and counties free to set their own property tax rates to fund local services. All real properties are subject to property tax, apart from those owned or used by religious, charitable, educational organizations or the federal or state government.
As a Maryland homeowner, you might pay more property tax than in many other states simply because house values are high.
The exact amount of your property tax bill is determined by the assessed value – which is calculated every three years by the property valuation division – and the actual tax rate.
A property tax break is available if you’re moving to Maryland in retirement. Residents who are 65 or older can defer any increases in their county taxes. This tax deferral then becomes a lien on your property that must be repaid only when the property is transferred.
Maryland motor tax
In keeping with sales taxes in general, Maryland collects a six percent excise tax on your vehicle purchases. This rate applies to the full price of your vehicle before trade-ins and other dealer incentives join the mix. It is for seven years old or newer vehicles. For older models, the tax is calculated using the purchase price.
Maryland taxes gasoline at $0.47 per gallon and diesel at $0.4775 per gallon.
Maryland estate tax
Maryland has both estate and inheritance taxes.
There is an estate exemption of $5 million, so you won’t have to worry about this particular tax unless your estate is valued above this limit.
There is also an inheritance tax, which is 10 percent of the fair market value of your property (minus qualified expenses) when it exceeds $1,000. Many beneficiaries, such as spouses and children, are exempt from this.
Maryland retirement tax
Suppose you’re relying mainly on Social Security benefits. In that case, your liability will be minimal as the state does not tax Social Security benefits. But your tax bill will be larger if you also have a retirement account and public pension income.
For further tax guidance and to ensure you’re not paying more tax than you need to, it’s wise to speak to an expert. A financial advisor can help you handle all your tax queries and ensure you’re not paying more tax than needed.
Senior Content Writer
Rachel is a Senior Content Writer at Unbiased. She has nearly a decade of experience writing and producing content across a range of different sectors.