How Much Does Maryland Take Out for Taxes?

Maryland levies various taxes to fund public services and infrastructure. Understanding these taxes helps residents comprehend their financial responsibilities and manage their finances.

Maryland State Income Tax Calculation

Maryland employs a progressive income tax system, where higher earners are subject to higher tax rates. For the 2024 tax year, filed in 2025, state income tax rates range from 2% to 5.75%.

Calculating Maryland taxable income begins with a taxpayer’s federal adjusted gross income (AGI). From this federal AGI, certain additions and subtractions specific to Maryland tax law are applied. For instance, taxpayers may need to add back certain state tax deductions taken on their federal return or subtract specific types of income, such as pension exclusions or certain military pay.

Maryland offers both standard and itemized deductions. The standard deduction varies by filing status. Personal and dependency exemptions are also available.

Various state-specific tax credits can further reduce an individual’s final state income tax liability. The Maryland Earned Income Tax Credit (EITC) is a significant credit for low-to-moderate-income working individuals and families, often equaling a percentage of the federal EITC. Another available credit is for taxes paid to other states, which helps prevent double taxation if a Maryland resident earns income in another state that also imposes an income tax. Maryland also offers a Child and Dependent Care Tax Credit, which is a percentage of the federal credit and can be refundable for certain income levels.

Local Income Taxes in Maryland

In addition to the state income tax, Maryland counties and Baltimore City levy their own local income taxes. These local taxes are calculated based on the same taxable income used for the state income tax, and their rates vary significantly by jurisdiction.

Local income tax rates across Maryland’s counties range from 2.25% to 3.2%. A taxpayer’s applicable local tax rate is determined by their county of residence as of December 31 of the tax year.

These local income taxes are not filed separately but are reported and collected through the state income tax return. The Maryland Comptroller’s Office manages the collection of both state and local income taxes, simplifying the filing process for residents. The total income tax burden for a Maryland resident therefore includes both the state and the local county or Baltimore City income tax.

Maryland Sales and Use Tax

Maryland imposes a statewide sales and use tax on the purchase of most tangible personal property and certain services. The general sales tax rate is 6%. There are no additional local sales taxes levied by counties or municipalities in Maryland.

Specific goods and services are subject to this tax, including most retail purchases. Certain items have different rates, such as alcoholic beverages (9%) and vehicle rentals (11.5%). Common exemptions include most food for home consumption (excluding prepared food), prescription medications, and certain medical devices.

The concept of “use tax” applies when a Maryland resident purchases tangible personal property outside the state and no sales tax was collected. If that item is brought into Maryland for use, storage, or consumption, the Maryland use tax, at the same 6% rate, becomes due.

Property Taxes in Maryland

Property taxes in Maryland are primarily a local levy, collected by counties and municipalities, though a small state component also exists. These taxes are assessed on real estate, funding services like schools, public safety, and local infrastructure. The Maryland Department of Assessments and Taxation (SDAT) assesses the fair market value of properties.

Property assessments in Maryland follow a triennial cycle. The assessed value serves as the basis for calculating the property tax bill. The annual tax bill is determined by multiplying the assessed value by the applicable property tax rate, expressed per $100 of assessed value. Local governments, including counties and incorporated cities, set their own property tax rates, leading to variations across the state.

Maryland offers several property tax credits to provide relief to homeowners. The Homestead Property Tax Credit limits the amount of assessment increase on which a homeowner pays property taxes each year. This credit caps the increase in taxable assessment for state and local purposes, regardless of how much the market value increases. Homeowners must apply once for this credit to establish eligibility.

Another program is the Homeowners’ Property Tax Credit, which provides relief based on a homeowner’s income. This credit limits the amount of property taxes a homeowner must pay to a fixed percentage of their gross household income, with income and net worth limitations. Unlike the Homestead Credit, the Homeowners’ Tax Credit requires an annual application to verify eligibility based on income and asset thresholds.