How Much Do Taxes Take Out of Your Paycheck in Maryland?

Employers routinely withhold a portion of employee earnings for various taxes. This payroll tax withholding ensures individuals contribute to their tax obligations throughout the year, supporting the federal “pay-as-you-go” system and preventing large tax bills. Understanding these deductions helps manage personal finances.

Key Taxes Withheld

Several types of taxes are withheld from an employee’s paycheck. These include federal income tax, state income tax, local income tax, and specific federal payroll taxes known as FICA taxes. Each deduction contributes to different government programs and services.

Federal income tax withholding is determined by federal tax laws and is progressive, meaning higher earners are subject to higher tax rates. The amount withheld depends on information provided by the employee to their employer. This tax funds various federal government operations.

Maryland imposes its own state income tax, withheld from employee wages. For 2025, Maryland utilizes a progressive tax system with rates ranging from 2% to 6.5%. New tax brackets have been introduced for higher-income earners, with top rates of 6.25% for income over $500,000 ($600,000 for joint filers) and 6.5% for income exceeding $1,000,000 ($1,200,000 for joint filers).

Maryland counties and Baltimore City levy a local income tax, in addition to state income tax. This local tax is subject to withholding, and its rate varies based on the employee’s jurisdiction of residence. For 2025, counties can set rates up to 3.3%. Some counties may have a flat rate, while others might adopt a progressive structure. If an employee does not provide a state withholding certificate, the highest local tax rate of 3.20% for 2025 may be applied by default.

Federal Insurance Contributions Act (FICA) taxes are a mandatory deduction, funding Social Security and Medicare programs. Social Security tax, labeled as OASDI on pay stubs, is 6.2% for employees, applied to wages up to an annual limit of $176,100 for 2025. Medicare tax is 1.45% of all wages, with no income limit. An additional Medicare tax of 0.9% applies to wages exceeding certain thresholds: $200,000 for single filers, $250,000 for married filing jointly, or $125,000 for married filing separately.

Factors Affecting Your Withholding

The amount of tax withheld from an individual’s paycheck is influenced by several key variables. Employers use these factors to calculate appropriate withholding for federal, state, and local income taxes. Understanding these elements helps individuals manage their take-home pay and avoid underpayment or overpayment of taxes.

An individual’s gross income directly impacts the amount of tax withheld; higher earnings result in higher withholding amounts. The tax system is progressive, meaning different portions of income are taxed at increasing rates. This structured approach ensures that withholding aligns with an individual’s overall earnings.

The filing status chosen by an employee significantly affects withholding calculations. Options such as Single, Married Filing Jointly, or Head of Household determine which tax brackets and standard deductions apply to their income. Selecting the correct filing status helps accurately set up withholding.

The number of dependents and other credits claimed on federal and state withholding forms reduces the amount of income subject to withholding. While federal Form W-4 no longer uses “allowances,” it accounts for qualifying children and other dependents. Maryland’s Form MW507 still utilizes personal exemptions, which function similarly to reduce taxable income.

Contributions to pre-tax benefit programs, such as 401(k) retirement plans or health insurance premiums, can lower an employee’s taxable income. Since withholding is based on taxable income, these deductions reduce the amount of tax withheld from each paycheck. This provides a tax advantage by deferring tax on the contributed amounts.

Employees can also request additional withholding if they anticipate owing more tax or prefer a smaller refund. Conversely, individuals may claim exemption from withholding if they meet certain income and tax liability criteria. These adjustments offer flexibility in managing one’s tax payments throughout the year.

Understanding Your Withholding Forms

To ensure the correct amount of tax is withheld, employees must accurately complete specific forms. These forms communicate an individual’s tax situation to their employer, guiding withholding calculations for federal, state, and local income taxes. The primary forms are federal Form W-4 and Maryland Form MW507.

Federal Form W-4, Employee’s Withholding Certificate, informs an employer how much federal income tax to withhold. This form no longer uses withholding allowances, but accounts for qualifying children and other dependents. Employees can obtain Form W-4 and its instructions directly from the IRS website.

Completing Form W-4 involves providing personal information, including name, address, Social Security number, and filing status. If an individual has multiple jobs or a working spouse, they address this to ensure accurate withholding across all income sources. The form allows claiming dependents, which can lead to tax credits that reduce the amount of tax withheld.

Individuals can also account for other income not subject to withholding, such as from gig work, or claim deductions beyond the standard deduction. This section also allows for specifying an additional dollar amount to be withheld from each paycheck. The form must be signed and dated before submission to the employer.

For Maryland state and local income tax withholding, employees complete Form MW507, Employee Withholding Exemption Certificate. This form informs their Maryland employer about their state and local tax situation. Form MW507 and its instructions are available on the Comptroller of Maryland’s official website.

Filling out Form MW507 requires providing personal details and selecting the appropriate filing status, such as Single, Married, or Head of Household. Employees enter the number of personal exemptions they will claim on their state tax return. The form also includes sections for claiming exemption from withholding under specific conditions or for requesting additional withholding amounts. Once completed and reviewed for accuracy, the signed MW507 form is submitted directly to the employer, not to the Comptroller of Maryland.

Reviewing Your Paycheck and Adjusting Withholding

Regularly reviewing your pay stub is an important practice for financial management. A typical pay stub itemizes gross wages, pre-tax deductions, and all withheld taxes, including federal income tax, state income tax, local income tax, and FICA taxes. This helps verify that your employer is deducting taxes according to your submitted withholding forms.

Several life events and financial changes may necessitate an adjustment to your withholding. These include marriage, the birth or adoption of a child, a new job, or a significant change in income. Review and adjustment are also advisable if you consistently receive a very large tax refund or owe a substantial amount of tax at year-end.

To adjust your withholding, you will need to complete and submit a new federal Form W-4 and/or Maryland Form MW507 to your employer. Obtain the blank forms from the IRS or Comptroller of Maryland websites. After completing the updated forms to reflect your current financial situation, submit them to your employer’s human resources or payroll department.

Once submitted, it takes one or two pay periods for the changes to your withholding to take effect. Monitor your subsequent pay stubs to confirm that the adjustments have been implemented correctly. This proactive approach helps ensure that your tax withholding remains aligned with your financial circumstances throughout the year.