Maryland LLC taxes depend almost entirely on how your LLC is classified for federal income tax. A single-member LLC is taxed by default as a sole proprietorship, a multi-member LLC as a partnership, and either can elect to be taxed as an S corporation or a C corporation. Maryland follows whatever classification the IRS recognizes, so that one choice controls which state forms you file, which rates apply, and whether the tax falls on the business or on you personally. On top of income tax, every Maryland LLC also owes a $300 annual report fee to the State Department of Assessments and Taxation, and most LLCs face sales tax, employment tax, or self-employment tax depending on what they do.
How Your LLC’s Tax Classification Works
The IRS “check-the-box” rules let LLCs pick their tax identity. A single-member LLC is automatically treated as a disregarded entity, and a multi-member LLC is automatically treated as a partnership. Either can override those defaults by filing Form 2553 to elect S corporation status or Form 8832 to elect C corporation status.1Internal Revenue Service. About Form 2553, Election by a Small Business Corporation The Maryland Comptroller does not run a separate election process. Whatever the IRS says your LLC is, Maryland treats it the same way.
Each classification triggers a different filing path, different rates, and different rules about who writes the check.
Single-Member LLCs
If you’re the only owner and you haven’t elected corporate treatment, your LLC isn’t a separate taxpayer for income tax purposes. You report business income and expenses on Schedule C of your federal Form 1040.2Internal Revenue Service. Sole Proprietorships That federal adjusted gross income flows onto your Maryland Resident Income Tax Return (Form 502), where it’s taxed at the state’s graduated individual rates.3Maryland Comptroller of the Treasury. Maryland Form 502 – Resident Income Tax Return The LLC files no separate Maryland income tax return.
The simplicity comes at a price: your full net profit is also subject to federal self-employment tax, covered below.
Multi-Member LLCs and S Corporations
A multi-member LLC taxed as a partnership, and any LLC that has elected S corporation status, must file the Maryland Pass-Through Entity Income Tax Return (Form 510).4Legal Information Institute. Maryland Code of Regulations 03.04.07.03 – Filing of Returns and Payment of Tax Form 510 is mostly informational. It reports the LLC’s income, deductions, and credits, and each member gets a Maryland Schedule K-1 showing their share. Members report that K-1 income on their personal Form 502 and pay tax at their individual rates.
The LLC itself owes no income tax unless it makes the elective pass-through entity tax payment or has nonresident members who trigger withholding.
The Elective Pass-Through Entity Tax
Maryland lets a pass-through entity elect to pay income tax at the entity level by filing Form 511 instead of Form 510.5Comptroller of Maryland. 2024 Form 511 Electing Pass-Through Entity Income Tax Return Instructions The election is annual and irrevocable once Form 511 is filed for the year. You can trigger it by checking the PTE election box on Form 510/511D (estimated tax) or Form 510/511E (extension). Filing Form 511 itself also counts as the election.
The PTE rate is 8.75% for individual members (the 6.50% top state rate plus the 2.25% lowest county rate) and 8.25% for members that are themselves entities.6Comptroller of Maryland. Maryland Form 511 – Pass-Through Entity Election Income Tax Return7Comptroller of Maryland. Business Income Tax Information The entity pays the tax and each member takes a credit against their personal Maryland return.
This election exists as a workaround for the federal cap on state and local tax (SALT) deductions. When the LLC pays state tax at the entity level, that payment is a business expense rather than a personal SALT deduction, so it sidesteps the individual cap. The math favors higher-income owners whose personal SALT deductions would otherwise be limited.
Nonresident Member Withholding
If the LLC has nonresident members and does not make the elective PTE payment, withholding is mandatory. The LLC must withhold on each nonresident’s share of Maryland-source income and remit it with Form 510.8Comptroller of Maryland. Tax Year 2025 PTE Booklet 510 Pass-Through Entity Income Tax Return Instructions The rate is 8.75% for nonresident individuals and fiduciaries and 8.25% for nonresident entity members. The amounts withheld become credits on the member’s Maryland Nonresident Income Tax Return (Form 505) or corporate return.
LLCs Taxed as C Corporations
An LLC that elects C corporation status files the Maryland Corporation Income Tax Return (Form 500) and pays a flat 8.25% on Maryland taxable income, starting from federal taxable income.9Comptroller of Maryland. Business Income Tax Filing Information10Maryland General Assembly. Maryland Code Tax-General 10-105 – State Income Tax Rates If the LLC expects to owe more than $1,000 for the year, it must make quarterly estimated payments on Form 500D.11Comptroller of Maryland. Maryland Form 500D – Corporation Declaration of Estimated Income Tax Underpaying triggers interest and penalties.
An LLC operating in multiple states apportions its income using Maryland’s single sales factor, which compares Maryland sales to total sales everywhere.12Comptroller of Maryland. Administrative Release IT-43 – Apportionment and 2018 House Bill 1794/Senate Bill 1090 Only the apportioned share is taxed at 8.25%.
What Members Actually Pay: State and Local Rates
Because most LLCs are pass-throughs, members pay the real income tax bill. Maryland’s graduated rates start at 2.00% on the first $1,000 of taxable income and reach 6.50% on taxable income above $1,000,000 (above $500,000 for single filers).13Comptroller of Maryland. Maryland Income Tax Rates and Brackets Most owners’ income lands in the 4.75% bracket, which covers taxable income from $3,001 to $100,000 for single filers and up to $150,000 for joint filers.
Every Maryland county and Baltimore City imposes its own local income tax on top of the state tax. Rates range from 2.25% in Worcester County to 3.30% in Dorchester County, with most jurisdictions near 3.20%.14Comptroller of Maryland. Maryland Withholding Tax Facts Your county rate is based on where you lived on December 31, and the state collects it through Form 502. There’s no separate local return.
Combined, a Maryland LLC member in a typical county can face a marginal state and local rate above 9.5% on their top dollars of business income, before federal tax enters the picture.
Self-Employment Tax
Federal self-employment tax catches a lot of new LLC owners off guard, and it sits on top of state income tax. If your LLC is taxed as a sole proprietorship or partnership, each member’s net earnings are subject to a combined 15.3% rate: 12.4% for Social Security on earnings up to $184,500 in 2026, and 2.9% for Medicare with no cap.15Social Security Administration. Contribution and Benefit Base An additional 0.9% Medicare surtax applies to self-employment income above $200,000 (or $250,000 joint).
You can deduct half of the self-employment tax when calculating adjusted gross income for both federal and Maryland purposes. Self-employed owners who pay for their own health insurance can also deduct those premiums federally if the plan is established under the business.
Electing S corporation status is a common way to shrink the self-employment tax bill. With an S corp, you pay yourself a reasonable salary subject to payroll taxes and take remaining profits as distributions that aren’t subject to self-employment tax. The trade-offs are added payroll compliance and the requirement to pay yourself a salary the IRS would consider reasonable for the work.
Member Estimated Tax Payments
Members receiving pass-through income without withholding must make quarterly estimated payments to Maryland if the resulting tax liability exceeds $500 for the year.16Comptroller of Maryland. Personal Tax Tip 54 – Should You Pay Estimated Tax to Maryland? Payments are due April 15, June 15, September 15, and January 15 of the following year. To avoid underpayment interest, your four installments must total at least 90% of the current-year Maryland liability or 110% of the prior-year liability, whichever is less, with each payment at least a quarter of the required total.
Sales and Use Tax
If your LLC sells tangible goods or certain taxable services in Maryland, you have to register with the Comptroller and collect sales tax. The general rate is 6%, and it applies statewide with no county or city add-ons.17Comptroller of Maryland. Sales and Use Tax FAQs Filing frequency scales with your sales volume.
Two categories carry a higher 9% rate: alcoholic beverages and adult-use cannabis.18Comptroller of Maryland. Sales and Use Tax Rates – Sale of Alcoholic Beverages19Comptroller of Maryland. Maryland Cannabis Quarterly Report 2025 Q2
Remote sellers shipping into Maryland hit economic nexus once they exceed $100,000 in annual sales or 200 transactions in the state. At that point they must register and collect sales tax, even without physical presence.
Employment Taxes
Any LLC that hires employees has to register with the Comptroller for state income tax withholding and with the Maryland Department of Labor for unemployment insurance. The LLC withholds state income tax from wages based on the graduated rates and the employee’s county, then files periodic withholding returns and an annual reconciliation.
Unemployment insurance rates vary by employer. New employers get a standard rate, and the rate adjusts over time with the employer’s claims history. These state obligations run alongside federal FICA and federal unemployment tax, and they apply regardless of how your LLC is classified for income tax.
SDAT Annual Report and Personal Property Return
Every LLC formed in Maryland or registered to do business here has to file an Annual Report and Personal Property Return (Form 1) with the State Department of Assessments and Taxation. The filing fee is $300 for domestic and foreign LLCs.20Maryland State Department of Assessments and Taxation. 2025 Form 1 Annual Report and Business Personal Property Return The deadline is April 15, with a two-month extension to June 15 available if you request it online by the original deadline.21Maryland Department of Assessments and Taxation. SDAT Extension Request Form
If the LLC owns or leases personal property in Maryland (furniture, fixtures, equipment, inventory) with a total original cost of $20,000 or more, you also complete the personal property return sections of Form 1.20Maryland State Department of Assessments and Taxation. 2025 Form 1 Annual Report and Business Personal Property Return What you report becomes the basis for local personal property taxes assessed by the county where the property sits.
Miss the filing and the LLC forfeits its right to do business in Maryland. Reinstatement means filing all delinquent reports, getting tax clearance certificates from the relevant county if personal property was reported, and paying a $100 reinstatement fee ($150 for expedited processing).22Maryland Department of Assessments and Taxation. Articles or Certificate of Reinstatement While your charter is forfeited, contracts signed on behalf of the LLC can expose members to personal liability, which makes this deadline more dangerous than the fee suggests.