How Much Is Maryland Inheritance Tax?

The Maryland inheritance tax is a levy on the right to receive property from a deceased individual’s estate, with the tax liability falling upon the beneficiary. Maryland is one of a limited number of states that imposes an inheritance tax, which is distinct from an estate tax.

Assets Subject to Inheritance Tax

The Maryland inheritance tax generally applies to assets transferred from a deceased person. This includes real estate, bank accounts, stocks, bonds, and other personal property physically located within Maryland, even if the deceased person resided elsewhere. For a Maryland resident, all property, real or personal, is subject to this tax, regardless of location. The tax applies to assets passing through a will, trust, joint ownership, or payable-on-death designations.

Specific exemptions can reduce or eliminate the inheritance tax burden. Property held jointly with a surviving owner, such as a spouse, may be exempt from this tax. Life insurance proceeds paid directly to a named beneficiary are not subject to inheritance tax. Property passing to charitable organizations is generally exempt. Small estates qualifying for simplified probate with property valued under $50,000 are also exempt.

Who Pays and How Much

The inheritance tax rate is determined by the beneficiary’s relationship to the deceased. Direct lineal heirs are completely exempt from this tax.

This exempt group includes:
Spouses
Children (biological or legally adopted)
Stepchildren
Grandchildren
Parents
Grandparents
Siblings

The spouse of a child or grandchild is also typically exempt. For collateral heirs and unrelated beneficiaries, a specific tax rate applies. The current inheritance tax rate for these non-exempt individuals is 10% of the inherited property’s clear value.

This 10% rate applies to individuals such as:
Nieces
Nephews
Cousins
Friends
Other non-family members

If the will or trust specifies that the estate will pay the inheritance tax on behalf of the beneficiary, the effective tax rate can increase slightly to approximately 11.1111% because the tax payment is considered an additional gift to the recipient.

Determining the Taxable Amount

Calculating the taxable amount involves several steps. The process begins by determining the fair market value of all taxable assets as of the deceased’s date of death. This valuation establishes the gross amount of property subject to taxation.

From this fair market value, deductions are subtracted to arrive at the net taxable estate. Common deductions include funeral expenses, estate administration costs, and debts owed by the deceased. The inheritance tax is then applied to each beneficiary’s share of this net taxable amount, based on their specific relationship to the deceased and the applicable tax rate.

Filing and Paying the Inheritance Tax

The responsibility for filing and paying the Maryland inheritance tax typically rests with the personal representative or executor of the estate. If no formal estate administration is opened, the property recipient is generally responsible for the tax. The deadline for filing and paying the inheritance tax is usually nine months after the deceased’s death.

The tax is reported using specific forms provided by the Comptroller of Maryland. These include Form AT-87 (Maryland Estate Tax Return) or Form AT-87B (Maryland Inheritance Tax Return). These forms, along with supporting documentation, are typically submitted by mail to the Register of Wills in the county where the deceased resided or owned property. While extensions to file may be granted, extensions to pay the tax are generally not permitted without incurring penalties.