The Maryland tax increases enacted in the 2024 and 2025 legislative sessions hit high earners, drivers, smokers, vapers, and businesses buying technology services. Lawmakers added two new top income tax brackets of 6.25% and 6.50%, raised the vehicle excise tax from 6% to 6.5%, restructured registration fees upward, imposed a new 3% sales tax on certain IT services, and pushed the cigarette tax to $5.00 per pack. Most changes are aimed at closing a structural deficit and funding the Blueprint for Maryland’s Future and transportation infrastructure.
New Top Income Tax Brackets for High Earners
Before 2025, Maryland’s top state income tax rate was 5.75%. The 2025 session added two new brackets above it. Single filers now pay 6.25% starting at $500,001 of taxable income and 6.50% at $1,000,001. Joint filers reach those rates at $600,001 and $1,200,001.1Comptroller of Maryland. Maryland Income Tax Rates and Brackets
The lower brackets did not change. Single filers still pay 2% on the first $1,000 and step up through 3%, 4%, and 4.75%, then 5.00% at $100,001, 5.25% at $125,001, 5.50% at $150,001, and 5.75% at $250,001. Joint filers follow the same staircase with wider income ranges. If you earn less than $250,000 single or $500,000 single (or the joint equivalents), the state rate structure is unchanged. Above those lines, you pay more.1Comptroller of Maryland. Maryland Income Tax Rates and Brackets
What the Combined State and County Rate Looks Like
Every Maryland county adds a local income tax on top of the state rate. State law requires each county to set that rate between 2.25% and 3.30% of Maryland taxable income.2Maryland General Assembly. Maryland Code Tax-General 10-106 – County Income Tax For a resident in the new 6.50% state bracket living in a county that charges 3.20%, the combined rate is 9.70%. In a county at the full 3.30%, the combined top rate reaches 9.80%.
Employers use the combined state and county rate to calculate paycheck withholding. If you move between counties mid-year, tell your employer so the correct local rate is applied. Underpayment of the county share still triggers interest and possible penalties at filing.
Higher Vehicle Registration Fees
The registration fee schedule changed on July 1, 2024. The prior fee for passenger cars up to 3,700 pounds was $137 for two years. The new schedule uses three weight tiers:
- Up to 3,500 lbs: $221 for two years ($110.50 per year)
- 3,501 to 3,700 lbs: $241 for two years ($120.50 per year)
- Over 3,700 lbs: $323 for two years, up from $187 ($161.50 per year)
Heavier SUVs and trucks saw the largest jump. The revenue goes to the Maryland Transportation Trust Fund.
Vehicle Excise Tax Rose to 6.5%
Maryland’s vehicle excise tax moved from 6% to 6.5% of the purchase price or fair market value on July 1, 2025. The tax applies to the greater of the actual price paid or a minimum book value. For vehicles seven years old and older, the minimum value used is $640.3MDOT Motor Vehicle Administration. Excise Tax You need proof of payment before you can get a permanent title.
The half-point increase compounds quickly on a real purchase. On a $40,000 vehicle, the tax was $2,400 under the old rate and is $2,600 now. That $200 stacks on top of the higher registration fees.
Electric and Hybrid Vehicle Surcharges
Owners of zero-emission vehicles pay an annual surcharge of $125 on top of standard registration fees. Plug-in hybrid owners pay $100 per year.4Alternative Fuels Data Center. Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Registration Fee The charges are collected at registration and directed to transportation funding, replacing fuel tax revenue the state does not collect on those vehicles.
One thing to know if you are planning an EV purchase: the federal clean vehicle tax credits expired for vehicles acquired after September 30, 2025.5Internal Revenue Service. Clean Vehicle Tax Credits Buying an EV in 2026 means no federal credit to offset Maryland’s surcharge.
Tobacco and Vaping Taxes
The cigarette tax rose from $3.75 to $5.00 per pack of 20 on July 1, 2024, an increase of $1.25.6Comptroller of Maryland. Tax Alert – Cigarettes, OTP, ESDs Tax Rate Changes July 1, 2024 Other tobacco products are now taxed at 60% of wholesale, up from 53%.7Maryland General Assembly. Maryland Code Tax-General 12-105 – Tobacco Tax Rate
Electronic smoking devices and vaping liquid in containers larger than 5 milliliters are taxed at 20%. Vaping liquid in containers of 5 milliliters or smaller carries a 60% rate.6Comptroller of Maryland. Tax Alert – Cigarettes, OTP, ESDs Tax Rate Changes July 1, 2024 These taxes are levied when products enter the Maryland market, generally at the distributor level, and are passed through in the retail price.
New 3% Sales Tax on IT Services
Starting July 1, 2025, Maryland applies a 3% sales tax to certain data and information technology services, including system software and application software publishing services.8Comptroller of Maryland. Tax Updates From the 2025 Legislative Session This is a new category. Most services in Maryland were previously exempt from sales tax entirely.
The general 6% sales tax on physical goods is unchanged. The 3% rate is lower, but the scope is what matters: businesses paying for cloud computing, data processing, or custom software should check invoices to confirm the tax is being applied correctly, since the provider is responsible for collecting it.
Digital Advertising Tax
Maryland is the only state taxing digital advertising revenue. It applies to companies with global annual gross revenues above $100 million, on ad revenue derived from Maryland users, at rates that scale with company size:
- $100 million to $1 billion in global revenue: 2.5%
- $1 billion to $5 billion: 5%
- $5 billion to $15 billion: 7.5%
- Over $15 billion: 10%
Most residents don’t pay this directly.9Maryland General Assembly. Maryland Tax-General Code 7-5-103 (2025) The cost may show up indirectly through advertising prices or platform behavior in the state.
The Federal SALT Cap Offsets Some of the Hit
The federal cap on deducting state and local taxes rose from $10,000 to $40,000 for 2025, with 1% annual increases through 2029. For 2026, the cap is approximately $40,400. It phases down to $10,000 for single filers earning above $250,000 and joint filers above $500,000. With Maryland’s combined state-and-local rate now as high as 9.80%, the higher cap matters if you itemize.
The federal standard deduction for 2026 is $16,100 for single filers and $32,200 for joint filers.10Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments From the One, Big, Beautiful Bill With higher Maryland income tax rates and a bigger SALT cap, itemizing may pay off for more filers in 2026 than in recent years.
What Did Not Change
Property tax mechanics were not part of the 2024 or 2025 increases. SDAT still reassesses every property once every three years, increases still phase in over three years, and the Homestead Tax Credit still caps annual growth in your taxable assessment at 10% (with many counties setting a lower cap).11Maryland Department of Assessments and Taxation. Maryland Homestead Property Tax Credit Program The Maryland estate tax still applies to estates above $5 million, and the 10% inheritance tax still applies to bequests to nieces, nephews, cousins, unrelated individuals, and certain others, while spouses, children, grandchildren, parents, grandparents, siblings, and registered domestic partners remain exempt.12Maryland Register of Wills. Inheritance Tax Rates and thresholds there were not moved by the recent sessions.