The Maryland millionaire tax, enacted through the Budget Reconciliation and Financing Act of 2025, raises the state’s top income tax rate to 6.50% on taxable income above $1 million for single filers and $1.2 million for joint filers, and adds a separate 2% surtax on net capital gains for anyone whose federal adjusted gross income exceeds $350,000. Stacked with local county income taxes of up to 3.30%, the combined state and local rate on a Maryland millionaire’s investment income can approach 12% before federal tax is applied.
The New Top Brackets
Maryland’s income tax uses graduated brackets, and the BRFA of 2025 added two new tiers at the top. For single filers under Tax-General Article ยง 10-105, the ladder now runs 2% on the first $1,000 of taxable income, stepping up through 4.75% between $3,001 and $100,000, then 5% to $125,000, 5.25% to $150,000, 5.5% to $250,000, 5.75% to $500,000, 6.25% to $1,000,000, and 6.50% on everything above $1 million.1Maryland General Assembly. Maryland Code Tax-General 10-105 – State Income Tax Rates Joint filers reach the 6.25% bracket at $600,001 and the 6.50% top rate at $1,200,001.2Maryland General Assembly. Fiscal and Policy Note for House Bill 1238
Before the BRFA, the top rate was 5.75% and it applied to all income above $250,000 single or $300,000 joint. The new law effectively splits the old top bracket into two higher tiers.
The rates are marginal, not cliff rates. Earning $1,000,001 as a single filer means one dollar is taxed at 6.50%; every lower slice is taxed at its own bracket rate. Over a $2 million income, though, the extra 0.75% above the old 5.75% ceiling adds up to real money.
The 2% Capital Gains Surtax
The BRFA of 2025 also created a flat 2% surtax on net capital gains included in Maryland adjusted gross income, applying to any individual whose federal AGI exceeds $350,000.3New York Codes, Rules and Regulations. Maryland Code Tax-General 10-105 – State Income Tax Rates The surtax sits on top of the ordinary bracket rates, so capital gains for a top-bracket filer are taxed at 8.50% at the state level alone before county tax is added.
Several categories of gains are carved out of the surtax:2Maryland General Assembly. Fiscal and Policy Note for House Bill 1238
- Sale of a primary residence with a sale price under $1.5 million
- Assets held in qualified retirement accounts
- Cattle or breeding livestock held longer than 12 months
- Land under conservation or agricultural preservation easements
- Property eligible for Section 179 expensing
- Affordable housing owned by a nonprofit
For a millionaire whose portfolio is mostly stocks, rental real estate above the threshold, or business interests being sold, none of these exemptions typically apply. The surtax hits in full.
How Local County Taxes Stack On Top
Maryland’s local income tax is unusual: every county and Baltimore City levies its own tax on the same taxable income the state uses, and the Comptroller collects it.4Maryland Comptroller. Maryland Income Tax Rates and Brackets State law sets a floor of 2.25% and a ceiling of 3.30%.5Maryland General Assembly. Maryland Code Tax-General 10-106 – County Income Tax Rate
For 2026, most populous counties sit at 3.20%: Montgomery, Prince George’s, Howard, Baltimore County, and Baltimore City. Dorchester and Kent charge the statutory maximum of 3.30%. At the low end, Worcester charges 2.25% and Talbot 2.40%.6National Finance Center. Maryland State and Counties Income Tax Withholding Anne Arundel and Frederick use graduated local structures that top out at 3.20% for higher incomes.
Your local rate is set by where you live on December 31 of the tax year, not where you work.4Maryland Comptroller. Maryland Income Tax Rates and Brackets On $1 million of taxable income, the gap between Worcester’s 2.25% and Montgomery’s 3.20% is $9,500 a year.
What the Combined Rate Actually Looks Like
The bite comes from stacking. A single filer with $2 million in ordinary income living in a 3.20% county pays a combined state and local rate of 9.70% on income above $1 million. In Dorchester or Kent, at 3.30% local, it’s 9.80%.
Capital gains land harder. A millionaire investor faces the 6.50% top bracket, plus the 2% capital gains surtax, plus the local rate. In a 3.20% county the combined rate on gains reaches 11.70%. In a 3.30% county, 11.80%. That’s before federal tax, which adds another 20% to 23.8% on long-term gains depending on income. Combined federal-state-local on investment income can exceed 35% for a Maryland millionaire.
One quirk worth flagging: the Maryland standard deduction is $3,350 for single filers and $6,700 for joint filers, far below the federal amount.7Maryland Comptroller. What’s New for the 2026 Tax Filing Season (2025 Tax Year) Maryland follows your federal choice: itemize federally and you can itemize for Maryland; take the federal standard deduction and you’re locked into Maryland’s much smaller standard deduction.
Adjusting Your Estimated Payments
Most millionaires don’t have all their income withheld. Investment income, business distributions, rental income, and realized gains all create estimated tax obligations. Maryland requires quarterly estimated payments if you expect to owe more than $500 beyond what’s withheld.8Cornell Law. Maryland Code of Regulations 03.04.01.02 – Estimated Tax Return
To avoid underpayment interest, pay the lesser of 90% of the current year’s tax or 110% of the prior year’s tax, spread across four equal installments.9Comptroller of Maryland. Should You Pay Estimated Tax to Maryland The 110% prior-year safe harbor is the one most high earners use because it’s predictable. But it depends on last year’s tax, which for many filers was calculated under the old 5.75% top rate. Anyone crossing the new thresholds in 2026 should recalculate under the new brackets and the capital gains surtax; the Comptroller publishes an estimated tax calculator that lets you pick a county and enter federal AGI to project the combined liability.10Maryland Taxes. Estimated Maryland and Local Tax Calculator
The Pass-Through Entity Election
Maryland lets S corporations, partnerships, and LLCs taxed as partnerships elect to pay income tax at the entity level instead of passing all income through to owners. The election was designed around the $10,000 federal SALT cap: when the entity pays the state tax, it becomes a deductible business expense rather than an individual state tax payment limited by the cap.
The entity-level rate combines the highest marginal state income tax rate with the lowest county rate. Members then claim a refundable credit on their individual Maryland return for their share of the tax paid, and any excess is refunded.11Maryland Comptroller. Frequently Asked Questions on the Maryland Pass-Through Entity Tax Members must add back the entity-level tax deducted federally when computing Maryland taxable income, which prevents double-dipping.
For a millionaire with meaningful ownership in a Maryland pass-through, this election can meaningfully reduce federal tax. The math gets tangled when members live in different states or the business operates across state lines, so this is a conversation with an accountant before the election is made, not after.
Filing
Maryland individual returns for the 2025 tax year are due April 15, 2026.12Comptroller of Maryland. iFile – Help Residents use Form 502, which starts with federal AGI and applies Maryland additions and subtractions. The Comptroller’s iFile system supports free electronic filing.13Comptroller of Maryland. Individual Taxpayer Online Service Center The rates in the BRFA of 2025 are codified in statute, not on a sunset, so they remain in effect until the General Assembly changes them.