Maryland’s inheritance tax rate is a flat 10% on the value of property passing to anyone outside a defined list of close relatives. Spouses, children, stepchildren, grandchildren, parents, and grandparents pay nothing. Everyone else — siblings, nieces, nephews, cousins, friends, unmarried partners — pays 10% on what they receive. There are no brackets and no minimum inheritance amount that escapes the tax.
Who Pays and Who Is Exempt
The tax turns entirely on the relationship between the person who died and the person receiving property. For deaths on or after July 1, 2000, these lineal relatives are fully exempt:
- Spouse
- Child, including adopted children
- Stepchild
- Grandchild or great-grandchild
- Parent
- Grandparent
Property left to a qualifying charitable organization is also exempt.1Register of Wills. Inheritance Tax
Everyone else pays 10%. This is where the tax catches families off guard. A brother inheriting a $400,000 house owes $40,000. A grandchild inheriting the same house owes nothing. The size of the inheritance doesn’t change the rate, and the rate doesn’t scale down for smaller gifts. A friend who inherits $5,000 in personal property owes $500.
Registered domestic partners who are not legally married do not qualify for the spousal exemption under either Maryland or federal tax law.2Internal Revenue Service. Answers to Frequently Asked Questions for Registered Domestic Partners and Individuals in Civil Unions For a non-married partner, the 10% rate applies to everything they inherit.
How the 10% Is Calculated
The rate applies to the “clear value” of inherited property, meaning fair market value at the date of death, minus allowable expenses.3Maryland General Assembly. Maryland Code Tax – General 7-204 There are no graduated brackets. Every taxable dollar is treated the same, whether the inheritance is $10,000 or $10 million.
Deductions that reduce the taxable amount include debts secured by the inherited property (a mortgage on an inherited house, for example) and the property’s share of estate administration costs, including its required contribution toward federal estate taxes.3Maryland General Assembly. Maryland Code Tax – General 7-204 The personal representative documents these on the inventory and accounting filed with the Register of Wills.4Register of Wills. Regular Estates
Maryland law also exempts the first $500 of any bequest specifically designated for the perpetual upkeep of graves. That’s narrow, but occasionally relevant.
What Property Is Subject to the Tax
The tax reaches further than probate. Maryland law defines property passing from a decedent to include:
- Real estate, bank accounts, vehicles, investments, and personal belongings passing by will or intestacy.
- The decedent’s interest in property held as a joint tenant, including joint bank and brokerage accounts.5Maryland General Assembly. Maryland Code Tax – General 7-201
- Retirement accounts, payable-on-death accounts, and other beneficiary-designated assets that pass outside probate, when the recipient is non-exempt.1Register of Wills. Inheritance Tax
- Property transferred within two years before death, if the transfer looks like a final disposition rather than a genuine lifetime gift.5Maryland General Assembly. Maryland Code Tax – General 7-201
Life Insurance
Life insurance proceeds paid to a named beneficiary other than the decedent’s estate are exempt from Maryland’s inheritance tax. If the policy names the estate itself as beneficiary, the proceeds lose that protection and become part of the taxable estate.1Register of Wills. Inheritance Tax
The Joint Account Pitfall
Joint bank accounts are one of the most common sources of unexpected liability. When a parent adds a non-exempt person, such as a sibling or a nephew, to a bank account for convenience, the decedent’s interest in that account becomes taxable at 10% when the parent dies. For intangible personal property, the written title controls, regardless of any informal understanding about who actually contributed the money.5Maryland General Assembly. Maryland Code Tax – General 7-201
Retirement Accounts
Inherited IRAs and other retirement accounts held by non-exempt beneficiaries are subject to the 10% inheritance tax in addition to the federal and state income tax owed on distributions. A non-exempt beneficiary inheriting a $200,000 IRA faces $20,000 in Maryland inheritance tax on top of ordinary income tax on every dollar eventually withdrawn.
Non-Resident Decedents
Maryland’s inheritance tax applies to non-residents who owned real property or tangible personal property located in the state. If someone lived in Virginia but owned a Baltimore rental property, transferring that property to a non-exempt beneficiary triggers the 10% tax.6Comptroller of Maryland. What You Need to Know About Maryland’s Estate Tax Intangible property such as stocks, bonds, and bank accounts belonging to a non-resident is generally not subject to Maryland’s inheritance tax, even if held at a Maryland institution.
If the personal representative of a non-resident’s estate lives outside Maryland, a Maryland resident must serve as their agent through the Appointment of Resident Agent form filed with the Register of Wills.7Register of Wills. Frequently Asked Questions
When and Where the Tax Is Paid
The Register of Wills, not the Comptroller, calculates and collects the inheritance tax. There is no fixed deadline measured in days from the date of death. Timing depends on how the estate is administered. For estates under regular court supervision, the tax is due when the Register determines the amount, at the point the personal representative files the accounting for distribution. Under modified administration, it’s due when the personal representative files the final report. For non-probate property with no formal administration, the tax is due when the Register determines the amount.8New York Codes, Rules and Regulations. Maryland Code Tax – General 7-217 – Deadline for Tax Payment
Estates worth $50,000 or less qualify for the small estate process. The threshold rises to $100,000 if the surviving spouse is the sole heir.9Register of Wills. What To Do If You Need To Open An Estate Small estates skip the formal inventory and accounting requirements, but the inheritance tax still applies to non-exempt transfers regardless of the estate’s size.
The Separate Maryland Estate Tax
The inheritance tax is not the only death tax Maryland imposes, and it’s easy to confuse the two. The estate tax is separate, administered by the Comptroller rather than the Register of Wills, and based on the size of the estate rather than the relationship of the beneficiary. It applies when the gross estate plus adjusted taxable gifts reaches Maryland’s fixed $5 million exemption, which is not indexed for inflation.6Comptroller of Maryland. What You Need to Know About Maryland’s Estate Tax
The estate tax rate can reach 16% of the amount above the exemption, capped at 5% for qualifying agricultural property. The return is due within nine months of death.10Comptroller of Maryland. Administrative Release – Maryland Estate Tax Inheritance tax already paid can be credited against the estate tax liability, but only if paid on or before the estate tax return’s due date. An estate large enough to trigger the estate tax with non-exempt beneficiaries can owe both.
Disputing an Assessment
If the Register of Wills assesses an amount you believe is wrong, whether the dispute is over a property valuation or whether an exemption applies, start with a protest to the Comptroller’s office. If the Comptroller’s final determination is still unsatisfactory, you have 30 days from the date of that notice to file an appeal with the Maryland Tax Court.11Comptroller of Maryland. Frequently Asked Questions About Hearings and the Appeals Process The Tax Court is an independent body that conducts a fresh review of the facts.12Maryland Tax Court. Procedures of the Maryland Tax Court Miss the 30-day window and you lose the right to judicial review, so calendar the deadline the day the determination arrives.