Maryland Estate and Inheritance Tax: Thresholds, Rates, and Deadlines

Maryland is the only state that charges both an estate tax and an inheritance tax, so a single estate can be taxed twice on the way to the heirs. The Maryland estate and inheritance tax works like this: the estate tax applies to estates worth more than $5 million and runs on a graduated scale up to 16%, while the inheritance tax is a flat 10% on assets passing to heirs who aren’t close family. Any inheritance tax paid is credited against the estate tax, so the same dollars aren’t fully taxed twice.¹

The Estate Tax: $5 Million Threshold, Up to 16%

The Maryland estate tax kicks in when the federal gross estate, plus adjusted taxable gifts and any property subject to a prior Maryland QTIP election, equals or exceeds $5 million. It applies to Maryland residents and to nonresidents who owned real or tangible personal property in the state.¹ The return is Form MET-1, filed with the Comptroller of Maryland separately from any federal Form 706.

The $5 million exemption has been fixed since 2019 and doesn’t adjust for inflation. Only new legislation can change it.

People routinely underestimate their gross estate. It includes everything the person owned at death regardless of location: real estate, bank accounts, investments, business interests, life insurance proceeds, annuities, jointly held property, and assets over which the deceased held a general power of appointment. Life insurance and joint accounts count even though they pass outside probate.¹

How the Rate Works

The tax uses a graduated schedule that starts at 0.8% on the first $40,000 above the exemption and climbs to a maximum of 16% on amounts more than roughly $10 million above the exemption.¹ The 16% ceiling is set by statute: the credit used to determine the tax cannot exceed 16% of the amount by which the taxable estate exceeds the exemption.²

Some rough numbers make the structure concrete. An estate worth $6 million (just $1 million over the exemption) owes about $38,800. A $10 million estate owes about $290,800. A $15 million estate owes more than $850,000. Deductions can move these figures, but the shape holds: the first dollars over $5 million are taxed lightly, and rates climb from there.

The Inheritance Tax: 10% Flat, But Only on Some Heirs

The inheritance tax is a flat 10% on the “clear value” (fair market value minus expenses) of property passing to non-exempt heirs.³ It’s paid to the Register of Wills in the county handling the estate.

What matters is who’s receiving. Property passing to any of the following is completely exempt from inheritance tax:

Spouses, including surviving registered domestic partners
Parents, grandparents, and stepparents
Children, their descendants, and stepchildren
Siblings
Spouses of children or other descendants
Charitable organizations exempt under IRC §501(c)(3)

⁴

In practice, the tax mostly hits bequests to nieces, nephews, cousins, friends, and unrelated beneficiaries. Leaving everything to a spouse and children triggers no inheritance tax at all, regardless of size.

How the Two Taxes Interact

Any inheritance tax paid to the Register of Wills is credited against the estate tax liability.¹ If the inheritance tax paid equals or exceeds the estate tax, no additional estate tax is due. A large bequest to a nephew, for example, may generate enough inheritance tax to wipe out the estate tax the estate would otherwise owe.

Deductions and the Missing Spousal Portability

Two deductions do most of the work in shrinking the taxable estate:

The marital deduction covers assets passing to a surviving spouse who is a U.S. citizen, in full. A non-citizen spouse can qualify only if the assets pass through a Qualified Domestic Trust (QDOT).
The charitable deduction covers bequests to organizations qualifying under IRC §501(c)(3), in full.

Maryland does not allow portability of the estate tax exemption between spouses. If one spouse dies with a $3 million estate, the unused $2 million of that spouse’s exemption disappears; it cannot transfer to the survivor the way the federal exemption can.¹ For couples with combined estates above $5 million, that gap is the reason to plan deliberately. Credit shelter trusts and a Maryland-only QTIP election (allowed on the state return without making the same election federally) are the two standard tools for preserving both spouses’ exemptions.²

The Farm Exclusion

Farming families get a distinct break. Up to $5 million of qualified agricultural property can be excluded from the gross estate under the Family Farm Preservation Act, on top of the general $5 million exemption.¹ The property must be real or personal property used primarily for farming, and it has to pass to a “qualified recipient” who continues to use it that way.⁵

If qualified farm property passing to a qualified recipient exceeds $5 million, the estate tax on the excess is capped at 5% rather than the standard 16%.⁵

Federal vs. Maryland: A $10 Million Gap

Maryland’s estate tax stands on its own. For 2026, the federal exclusion is $15 million per individual.⁶ Maryland’s is $5 million.¹ An $8 million estate owes nothing to the IRS but has a real Maryland bill.

Maryland generally follows federal definitions of the gross and taxable estate, with modifications for the exemption amount, the QTIP election, and the agricultural exclusion.² Estates required to file federally must attach a copy of Form 706 to the Maryland return.

The federal system offers portability: a surviving spouse can inherit the deceased spouse’s unused federal exemption by filing a timely Form 706, even when no federal tax is owed.⁷ Maryland has no counterpart.

Deadline, Payment, and Interest

Form MET-1 is due nine months after the date of death. Form MET-1E extends the time to file, but not the time to pay. The tax itself is due within the original nine-month window regardless of any filing extension.

Estates that are asset-rich but cash-poor (real estate, closely held business interests) sometimes can’t produce the money in nine months. Estimated payments can go in before the final return to slow the interest clock, and the Comptroller can approve an alternative payment schedule, which may take the form of a deferral or an installment plan; approval is discretionary and a denial comes in writing.⁸

Interest runs at 10% per year on unpaid tax starting at the nine-month mark. An estate that takes two years to resolve a liquidity problem can see interest alone approach 20% of the original liability. Additional penalties can apply on top of interest, and willful underreporting or deliberate non-filing can lead to more severe consequences, including potential criminal prosecution.

Disputing an Assessment

Estates that disagree with the Comptroller’s calculation usually start by asking for an administrative review, submitting independent appraisals or written arguments for a disputed deduction. If that outcome is unfavorable, the next stop is the Maryland Tax Court, which handles state tax disputes and doesn’t require the disputed amount to be paid before filing an appeal. Rulings from the Tax Court can be taken further into the Circuit Court and the Appellate Court of Maryland. Valuation fights and deduction denials drive most of these cases, and the dollar amounts involved usually justify bringing in legal counsel from the start.

1
Comptroller of Maryland. What You Need to Know About Maryland’s Estate Tax
2
Maryland General Assembly. Maryland Code Tax-General 7-309 – Effect of Change in Federal Estate Tax Law
3
Maryland General Assembly. Maryland Code Tax-General 7-204 – Tax Rate
4
Maryland General Assembly. Maryland Code Tax-General Section 7-203 – Exemptions
5
Maryland General Assembly. Maryland Code Tax-General Section 7-309 – Effect of Change in Federal Estate Tax Law
6
Internal Revenue Service. Estate Tax
7
Internal Revenue Service. What’s New – Estate and Gift Tax
8
Maryland General Assembly. Maryland Code Tax-General 7-307 – Alternative Payment Schedule