Maryland State Income Tax: Brackets, Local Rates, and Credits

Maryland’s state income tax rates for 2026 run on a progressive scale from 2% to 6.5%, applied across ten brackets. On top of that, every county and Baltimore City charges a flat local income tax between 2.25% and 3.20%, collected through your state return.¹² The state rates are marginal, meaning each rate applies only to the slice of taxable income inside that bracket, not to your whole income.

2026 State Tax Brackets

Two new top brackets took effect in 2026. Before this year the top rate was 5.75%; now income above $500,000 is taxed at 6.25%, and income above $1,000,000 (single) or $1,200,000 (joint) is taxed at 6.5%.¹

For single filers and those married filing separately:

2% on taxable income up to $1,000
3% on income from $1,001 to $2,000
4% on income from $2,001 to $3,000
4.75% on income from $3,001 to $100,000
5% on income from $100,001 to $125,000
5.25% on income from $125,001 to $150,000
5.5% on income from $150,001 to $250,000
5.75% on income from $250,001 to $500,000
6.25% on income from $500,001 to $1,000,000
6.5% on income over $1,000,000

Joint filers, heads of household, and qualifying surviving spouses use the same rate ladder with wider brackets at the top. The 4.75% bracket runs up to $150,000 rather than $100,000, and the 6.5% top rate begins at $1,200,000 rather than $1,000,000.¹

Local County Rates

All 23 counties plus Baltimore City add a flat local income tax on top of the state rate. The lowest is Worcester County at 2.25%. The highest, at 3.20%, applies in Baltimore City, Montgomery County, Prince George’s County, Howard County, and several others. Most counties sit between 2.65% and 3.20%.²

Which county rate you pay is set by where you lived on December 31 of the tax year, not where you worked or how many places you lived during the year. Moving from a lower-rate county to a higher-rate one late in the year means the higher rate applies to all of your income for that year. The local tax is figured on the same return as the state tax; there is no separate local filing.

Rates for Nonresidents and Reciprocity States

If you live in another state and earn Maryland-source income, you pay the state’s progressive rates plus a flat 2.25% nonresident tax in place of a county rate.³ Nonresidents file Form 505 and owe tax only on income from work physically performed in Maryland or from Maryland property.

Maryland has reciprocal agreements with Pennsylvania, Virginia, West Virginia, and Washington, D.C. Residents of those four jurisdictions whose only Maryland income is wages or salary owe no Maryland tax, but the exemption is not automatic: you must file an exemption certificate with your employer to stop Maryland withholding.³ Residents of any other state get no such carve-out and owe Maryland tax on Maryland-source income.

Remote work is taxed based on where the work is physically done, not where the employer is located. A worker living out of state who logs in from home for a Maryland-based employer generally does not owe Maryland tax on that pay. Splitting time between a home office and a Maryland worksite means owing Maryland tax on the portion earned inside the state.⁴

Deductions That Lower Taxable Income

Maryland’s standard deduction is 15% of your Maryland adjusted gross income, with a statutory minimum and maximum that depend on filing status. Joint filers, heads of household, and qualifying surviving spouses get roughly double the caps used for single and married-filing-separately filers. Because the deduction is a percentage of AGI, lower-income filers often fall below the maximum.

If you itemize federally, you can itemize on your Maryland return. The usual categories apply: mortgage interest, medical expenses over 7.5% of federal AGI, state and local taxes subject to the federal $10,000 SALT cap, and charitable gifts. Itemizing pays off most often for homeowners with large mortgages or filers with heavy medical costs.

Maryland also allows a $3,200 personal exemption for you, your spouse (on a joint return), and each dependent. The exemption phases out at higher incomes. For single filers, the phase-out begins at $100,000 of federal AGI and finishes at $150,000; for joint filers it begins at $150,000 and finishes at $200,000. Taxpayers 65 or older, or legally blind, get an extra $1,000 exemption that is not subject to the income phase-out.⁵

Credits That Cut the Bill

Maryland’s Earned Income Credit is a refundable state credit calculated as a percentage of the federal EITC. Because it is refundable, it can produce a refund even if you owe no state tax. You have to claim the federal EITC first to be eligible for the Maryland version.

The Maryland Child Tax Credit is worth up to $500 per qualifying child, and it is refundable. A qualifying child must be under age 6, or under age 17 with a disability. The full credit goes to filers with federal AGI of $15,000 or less, then drops by $50 for every $1,000 of income above that threshold, phasing out at $24,000.⁶

If you claim the federal child and dependent care credit, Maryland adds a nonrefundable credit worth a percentage of the federal amount. That percentage runs from 32.5% for households with AGI under $41,000 down to zero above $50,000.

The Student Loan Debt Relief Tax Credit is a refundable credit of up to $5,000 for filers who incurred at least $20,000 in undergraduate or graduate student loan debt and still owe at least $5,000. You do not claim it on your return; you apply through the Maryland Higher Education Commission by September 15 each year. Any credit you receive must be used to pay down the loan, and amounts not applied within three years can be recaptured.⁷

Contributions to the Maryland Senator Edward J. Kasemeyer College Investment Plan (the state’s 529 plan) are deductible up to $2,500 per beneficiary per year, with no limit on the number of beneficiaries. Unused contributions can be carried forward for up to 10 years. Legislation from the 2025 session may have raised the limit to $4,850 per beneficiary starting in 2026; the Comptroller’s current-year instructions confirm the applicable figure.⁸

Retirement and Military Income

Social Security and Railroad Retirement benefits are fully exempt from Maryland income tax, even when a portion is federally taxable.⁹

Other retirement income (pensions, 401(k) distributions, IRA withdrawals, annuities) qualifies for a pension exclusion if you are at least 65, totally disabled, or have a totally disabled spouse. The maximum exclusion is indexed to the highest Social Security benefit payable; it was $41,200 for tax year 2025 and rises slightly in 2026. The exclusion is reduced dollar-for-dollar by Social Security or Railroad Retirement benefits received, so retirees with larger checks see a smaller pension exclusion.⁹

Active-duty service members stationed outside the United States can subtract up to $15,000 of military pay from Maryland taxable income if their total military pay is under $30,000.¹⁰ Military retirees under 55 can subtract $12,500 of retirement pay; pending 2026 legislation would raise that to $20,000.¹¹ Retirees 55 or older typically get more mileage out of the general pension exclusion instead.

Who Has to File and When

You must file a Maryland return if your gross income meets or exceeds the federal standard deduction for your filing status. For 2026 that is $16,100 for single filers, $24,150 for heads of household, and $32,200 for joint filers.¹² Filing below the threshold can still make sense: you may be due a refund of withheld tax or eligible for refundable credits like the EIC or Child Tax Credit.

Full-year residents file Form 502. Nonresidents file Form 505. Part-year residents file Form 502 with the part-year box checked and prorate deductions and exemptions based on the time spent in Maryland. Form 502X is only for amending an already-filed return.

The deadline mirrors the federal one: April 15, or the next business day if that falls on a weekend or holiday. Form 502E gives you an automatic six-month extension to file, but not to pay. Any tax owed is still due April 15, and interest starts accruing right away on unpaid balances.¹³ Balances over $10,000 must be paid electronically.

Withholding and Estimated Payments

Employers withhold Maryland state and local tax from wages based on Form MW507, which you complete at hire and update whenever your circumstances change. The form sets your exemption count and any extra amount to withhold. If you expect to owe no Maryland tax, you can claim a full withholding exemption on the same form.¹⁴

Self-employed workers, freelancers, and anyone with substantial untaxed income (rentals, investment gains, business earnings) make quarterly estimated payments on Form 502D. The due dates are April 15, June 15, September 15, and January 15 of the following year. To avoid an underpayment penalty, your combined withholding and estimated payments must cover at least 90% of the current year’s tax or 110% of the prior year’s tax.¹⁵

Penalties for Late or Unpaid Tax

Failure to pay on time can trigger a penalty of up to 10% of the unpaid tax, with interest accruing on top at a rate the Comptroller sets each year.¹⁶ Underpaying quarterly estimates carries its own separate penalty based on each quarter’s shortfall.

Willfully failing to file a Maryland return is a misdemeanor punishable by a fine of up to $10,000, up to five years in prison, or both. The same penalties apply to knowingly filing a false return or helping someone else evade tax.¹⁷ The Comptroller can garnish wages, seize bank accounts, and place liens on property to collect. If a notice of assessment or proposed adjustment arrives, responding by the stated deadline preserves your options; ignoring it does not.

1
Comptroller of Maryland. 2026 Maryland State and Local Income Tax Withholding Information
2
National Finance Center. Maryland State and Counties Income Tax Withholding
3
Comptroller of Maryland. Administrative Release No. 3 – Nonresident Credits and Reciprocal Agreements
4
Comptroller of Maryland. 2026 Maryland Employer Withholding Guide
5
Comptroller of Maryland. Personal Exemptions Worksheet
6
Maryland General Assembly. Fiscal and Policy Note for Senate Bill 468
7
Maryland General Assembly. Fiscal and Policy Note for House Bill 1297
8
Maryland General Assembly. Income Tax – Subtraction Modification – Maryland 529 Plan Contributions (SB0412)
9
Maryland General Assembly. Fiscal and Policy Note for House Bill 13 – 2026 Session
10
U.S. Army. Maryland Military and Veterans Benefits
11
Maryland General Assembly. Income Tax – Subtraction Modification for Military Retirement Income
12
Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026
13
Comptroller of Maryland. Administrative Release No. 4 – Extension of Time for Filing
14
Comptroller of Maryland. Form MW507 Employee Withholding Exemption Certificate
15
Cornell Law School. Maryland Code Regulations 03.04.01.02 – Estimated Tax Return
16
Maryland General Assembly. Maryland Code Tax-General 13-701
17
Maryland General Assembly. Maryland Code Tax-General 13-1001