The Maryland inheritance tax is a flat 10% tax on the value of property you receive from someone who died, and it applies only if you aren’t a close family member of the deceased. Spouses, children, grandchildren, parents, siblings, and several other close relatives owe nothing. Everyone else, including nieces, nephews, cousins, friends, and unmarried partners who haven’t registered as domestic partners, pays 10% on what they inherit. The tax is owed by the person receiving the property, not the estate, and it reaches assets that pass outside of probate too.
Who Pays and Who Is Exempt
Close family is fully exempt. That means spouses, children, grandchildren, great-grandchildren, stepchildren, parents, grandparents, and siblings owe no inheritance tax on what they receive.1Maryland General Assembly. Maryland Tax – General Code 7-203 (2025) The list also covers a child’s spouse, so sons-in-law and daughters-in-law are protected. Registered domestic partners have qualified for the same full exemption as spouses since October 1, 2023.2Office of the Register of Wills. Inheritance Tax
Certain organizations also pay nothing: charities recognized under Internal Revenue Code 501(c)(3), state and local government entities, and family-owned corporations whose shareholders are all exempt family members.2Office of the Register of Wills. Inheritance Tax
Everyone outside those categories pays the full 10%. The most common non-exempt beneficiaries are nieces, nephews, cousins, friends, and unmarried partners without a registered domestic partnership. If real estate sits in Maryland, the tax applies even when the beneficiary lives out of state.
The 10% Rate and How Clear Value Is Calculated
Maryland applies a flat 10% rate to all non-exempt beneficiaries. There are no brackets and no lower rate for smaller bequests.3Maryland General Assembly. Maryland Tax – General Code 7-204 (2024) – Tax Rate
The 10% isn’t applied to the sticker value of the asset. It’s applied to what the statute calls the “clear value,” meaning fair market value on the date of death, reduced by expenses tied to the property.3Maryland General Assembly. Maryland Tax – General Code 7-204 (2024) – Tax Rate Deductible expenses generally include debts secured by the property and a share of administration costs. So if you inherit a house worth $400,000 with a $150,000 mortgage against it, the taxable clear value is $250,000, and the tax is $25,000.
Fair market value is measured as of the date of death. Any appreciation before that date doesn’t matter, and the price the deceased originally paid doesn’t matter either.
The bill lands on the beneficiary by default. If the will directs the estate to cover inheritance taxes, the personal representative pays them before distributing assets. Without that direction, you pay out of your share, which sometimes means selling or borrowing against an illiquid asset to raise the cash.
What Property Is Taxable
The tax reaches most of what you’d think of as an inheritance: Maryland real estate, bank accounts, investment portfolios, personal property, and business interests.4Maryland General Assembly. Maryland Tax – General Code 7-202 (2025) – Imposition of Tax
It also reaches beyond probate, which is where non-exempt beneficiaries most often get caught off guard. Property passing through joint ownership, revocable trusts, payable-on-death accounts, and retirement plans with named beneficiaries is subject to the inheritance tax.2Office of the Register of Wills. Inheritance Tax Skipping probate doesn’t skip the tax.
Maryland also taxes property the deceased transferred within two years before death when the transfer looks like a final disposition made in contemplation of dying. If you received a large gift shortly before the person died, that gift may be pulled back into the tax base.
Property That Escapes the Tax
A few categories are exempt regardless of who receives them:
- Life insurance benefits paid to a named beneficiary other than the estate. If the estate itself is the beneficiary, the proceeds become taxable.
- Property passing to any one person totaling $1,000 or less.
- Property administered through Maryland’s small estate process.
- Real property subject to a perpetual conservation easement.
- Intangible personal property of a non-resident deceased. Tangible property physically located in Maryland stays taxable.
Filing and Payment
All inheritance tax filings go through the Register of Wills in the county where the deceased lived. If the deceased lived outside Maryland but owned Maryland real estate, the filing goes to the Register of Wills in the county holding the largest portion of the Maryland property by value.5Register of Wills – Maryland.gov. Administration of Estates in Maryland
When a formal estate is opened, the personal representative files an Information Report with the Register of Wills within three months of appointment, listing non-probate assets, date-of-death values, outstanding liens, and each beneficiary’s name and relationship to the deceased.6Register of Wills – Maryland.gov. Administering Estates in Maryland – A Basic Instructional Guide
When there is no formal administration, the beneficiary receiving non-probate assets must file an Application to Fix Tax on Non-Probate Assets within 90 days of the death.6Register of Wills – Maryland.gov. Administering Estates in Maryland – A Basic Instructional Guide This is easy to miss because no executor is sending reminders.
Filings need an inventory of taxable assets, valuations as of the date of death, and supporting documentation. Real estate typically requires a formal appraisal, securities need brokerage statements showing date-of-death prices, and bank accounts need statements. Closely held businesses and unusual collectibles usually require a professional appraisal, which the Register may still question.
The personal representative pays the tax to the Register of Wills at the time of accounting for distribution of each legacy or intestate share.4Maryland General Assembly. Maryland Tax – General Code 7-202 (2025) – Imposition of Tax Installment arrangements through the Register of Wills may be possible when the inherited assets are illiquid, though interest continues to accrue.
How It Interacts With Maryland’s Estate Tax
Maryland is the only state that imposes both an inheritance tax and a separate estate tax, so a single estate can face both. The estate tax is calculated on the total value of the estate above the $5 million exemption and is paid to the Comptroller of Maryland. The inheritance tax is calculated on individual bequests and is paid to the Register of Wills.
The two don’t simply stack. Inheritance tax paid to the Register of Wills is subtracted from the Maryland estate tax owed, so if the inheritance tax equals or exceeds the estate tax, no separate estate tax payment is due.7Comptroller of Maryland. What You Need to Know About Maryland’s Estate Tax Timing still matters: estate tax accrues interest starting nine months after death until inheritance tax is actually paid, so slow inheritance tax payments can trigger estate tax interest even when the two would ultimately offset.8Comptroller of Maryland. Administrative Release No. 30 – Maryland Estate Tax
Federal Stepped-Up Basis
The Maryland inheritance tax is separate from federal income tax on inherited property, and one federal rule matters when you eventually sell. Your tax basis in inherited property resets to the fair market value on the date of death.9Internal Revenue Service. 2025 Publication 559 If a parent bought a house for $100,000 and it was worth $500,000 at death, your basis is $500,000. Sell it for $510,000 shortly after, and your capital gain is $10,000. Any gain on inherited property qualifies for long-term capital gains rates regardless of how long you hold it after the death.10Internal Revenue Service. Gifts and Inheritances You still owe the Maryland 10% on the clear value, but the federal basis step-up softens the capital gains hit later.
Penalties, Interest, and Liens
Late payment triggers a penalty of up to 10% of the unpaid tax.11Maryland General Assembly. Maryland Tax – General Code 13-701 (2025) – When Return Not Filed or Tax Not Paid Interest runs at a rate set by the Comptroller from the date the tax was due until paid.
The Register of Wills can place a tax lien on inherited property, which blocks a sale or transfer until the tax is paid. In serious cases, the Maryland Attorney General’s Office can pursue court action to collect.
Disputing an Assessment
Most disputes are about valuation or about whether the beneficiary qualifies as exempt. Start by asking the Register of Wills to reconsider, and bring documentation: an independent appraisal, birth or marriage certificates, or whatever else supports your position.
If reconsideration doesn’t resolve it, you can appeal to the Maryland Tax Court within 30 days of the Register of Wills’ final determination.12New York Codes, Rules and Regulations. Maryland Code Tax-General 13-510 – Appeals to Tax Court That deadline is firm. Tax Court decisions can be appealed further through the Maryland circuit court system, and at that stage a tax attorney familiar with Maryland inheritance disputes is usually worth the cost.