Comparing Maryland vs Pennsylvania taxes comes down to a few pivot points: Pennsylvania charges a flat 3.07% state income tax while Maryland uses graduated rates up to 5.75% plus a mandatory county income tax of up to 3.30%, so Pennsylvania usually wins for wage earners and almost always wins for retirees, while Maryland is friendlier on inheritances passing to close family and often on property taxes. Which state actually costs you less depends on your income level, the county or municipality you live in, and what kind of wealth you hold.
State Income Tax Rates
Maryland taxes individual income on an eight-bracket graduated scale. The lowest rate is 2% on the first $1,000 of taxable income, and the top marginal rate of 5.75% kicks in above $250,000 for single filers or $300,000 for joint filers, heads of household, and qualifying surviving spouses.1Comptroller of Maryland. Tax Information for Individual Income Tax The middle brackets (4.75%, 5.00%, 5.25%, and 5.50%) create a fairly smooth climb through six-figure incomes.
Pennsylvania uses a flat 3.07% rate on all taxable income, regardless of amount.2Commonwealth of Pennsylvania. Personal Income Tax The state defines eight classes of taxable income, and a loss in one class cannot offset income in another and cannot be carried forward or backward. A bad year in a side business will not reduce the tax on your W-2 wages.
At $60,000 in wages, the Maryland state rate alone works out to roughly 4.5% effective, higher than Pennsylvania’s 3.07%. At $300,000, a single Maryland filer pays an effective state rate approaching 5.4%. Pennsylvania wins on state rate alone at almost every income level. County and municipal add-ons complicate that picture later.
Deductions and Low-Income Relief
Maryland offers a standard deduction of up to $4,500 for joint filers and up to $2,250 for single filers, applied before the rate schedule.3Maryland General Assembly. Maryland Code Tax – General 10-217 – Standard Deduction The state also allows personal exemptions that phase out at higher incomes, and a state Earned Income Tax Credit worth up to 50% of the federal EITC for filers with qualifying children and up to 100% of the federal credit for workers without qualifying children. The state EITC is refundable.
Pennsylvania takes the opposite approach: no standard deduction and no personal exemption. The only allowed deductions are contributions to 529 college savings plans, ABLE savings accounts, and health or medical savings accounts.4Pennsylvania Department of Revenue. PA Personal Income Tax Guide – Deductions and Credits For most wage earners, the full paycheck is taxable at 3.07%.
Pennsylvania compensates through the Tax Forgiveness program, which reduces or eliminates state income tax for low-income filers. A family of four earning up to $34,250 qualifies for at least partial forgiveness; a single-parent household with two children qualifies with income up to $27,750.5Department of Revenue. Tax Forgiveness At very low incomes the combination of flat tax plus forgiveness can beat Maryland’s brackets. For middle-income earners who don’t qualify, the 3.07% still applies to every dollar because there’s no deduction to shrink the base.
Retirement Income
This is the sharpest divergence between the two states. Pennsylvania broadly exempts retirement income. Distributions from pensions, 401(k) plans, and IRAs taken after eligible retirement age are not taxed, and Social Security benefits are fully exempt.6Pennsylvania State Employees’ Retirement System. Taxes A retiree living on these sources can have an effective state income tax rate of zero.
Maryland taxes most retirement income at normal progressive rates, but residents age 65 and older (or those totally disabled) may claim a pension exclusion. The maximum was $41,200 for the 2025 tax year, indexed to the highest Social Security benefit.7Maryland General Assembly. Fiscal and Policy Note for House Bill 13 The exclusion is reduced dollar-for-dollar by Social Security or Railroad Retirement benefits received. Maryland does not tax Social Security at the state level.
A retiree drawing $50,000 from a 401(k) and $25,000 in Social Security owes nothing in Pennsylvania. In Maryland, that same retiree subtracts Social Security from the pension exclusion, potentially leaving a good portion of the 401(k) income taxable at state and county rates. For anyone deciding where to retire, this alone can settle the question.
Capital Gains
Pennsylvania taxes capital gains at the flat 3.07% rate, the same as any other income class. No preferential rate, no surcharge.
Maryland historically taxed capital gains as ordinary income, but starting in 2025, the state imposes an additional 2% tax on net capital gains for individuals with federal adjusted gross income above $350,000, regardless of filing status.8Comptroller of Maryland. Technical Bulletin 58 Capital Gains That brings the maximum state rate on capital gains to 7.75% before county taxes. A Maryland resident in a county charging 3.20% who liquidates a large investment position can face a combined rate above 10% on the gain. The same sale in Pennsylvania costs 3.07%.
The surcharge does not apply to corporations or to taxpayers with AGI of $350,000 or less. Below that threshold, capital gains in Maryland are still taxed as ordinary income at state and county rates, which is generally higher than Pennsylvania’s 3.07% but well short of the combined rate the surcharge produces.
Local Income Taxes
Local income taxes are where headline rates get overtaken.
Maryland County Income Tax
Every Maryland county and Baltimore City imposes a local income tax calculated as a percentage of state taxable income and collected on the same return. Rates vary, with the maximum allowable rate increased to 3.30% for tax year 2026.9Maryland General Assembly. Fiscal and Policy Note for House Bill 1238 Most counties cluster between 2.50% and 3.20%. The county tax is unavoidable for residents and applies to the same taxable income base, so it effectively adds two to three percentage points to every Maryland resident’s income tax burden.
Combine the top state rate of 5.75% with a typical county rate near 3.00% and a high-income Maryland resident faces a combined state-and-local income tax rate approaching 8.75%.
Pennsylvania Earned Income Tax and Local Services Tax
Pennsylvania’s local system is more fragmented. Two levies apply: the Earned Income Tax (EIT) and the Local Services Tax (LST). EIT is a percentage of earned income collected at the municipal and school district level, with rates from about 0.5% to roughly 3.9% in Philadelphia. Many suburban and rural municipalities charge around 1%.
The LST is a flat annual tax of up to $52 on anyone who works in a municipality that levies it. Employers must withhold EIT based on the higher of the employee’s work location rate or residence rate, and each location is identified by a six-digit Political Subdivision Code. Two Pennsylvania residents ten miles apart can face very different local tax bills.
Practical result: a Maryland resident in a 3.00% county and a Pennsylvania resident in a 1.00% EIT suburb face very different burdens on the same wages. A Pennsylvania resident in Philadelphia paying 3.75% or more in local tax is in roughly the same position as a Maryland resident in a high-rate county.
Property Taxes
Property taxes in both states are locally administered, so statewide averages are a rough guide at best. Maryland’s effective property tax rate averages around 0.90% of a home’s assessed value; Pennsylvania’s averages closer to 1.19%. Both figures mask heavy county-to-county variation.
Maryland centralizes assessment through the State Department of Assessments and Taxation, which appraises every property at 100% of fair market value on a rotating three-year cycle. Assessment increases phase in over three years. Maryland also offers a Homestead Tax Credit that caps annual taxable assessment increases at 10% or less for owner-occupied primary residences, with many counties setting a lower cap. Homeowners must file a one-time application, and the property must be the owner’s principal residence for at least six months of the year, including July 1.10Maryland Department of Assessments and Taxation. Homestead Tax Credit
Pennsylvania handles assessment at the county level with far less standardization. Some counties have not conducted a full reassessment in decades. The state uses a Common Level Ratio to adjust assessments for certain taxes and appeals, but the underlying disparity can still produce odd results between neighboring properties. The largest share of most Pennsylvania property tax bills funds local school districts, which set their own millage rates.
Pennsylvania offers a Property Tax/Rent Rebate Program for residents age 65 and older, widows and widowers age 50 and older, and people with disabilities. Rebates are income-based, with the current cycle’s application deadline set at June 30, 2026.11Commonwealth of Pennsylvania. Apply for Property Tax or Rent Rebate
Sales, Gas, and Cigarette Taxes
Both states charge a 6% state sales tax. Maryland allows no local surcharges, so 6% is the rate statewide. Pennsylvania allows two local add-ons: Allegheny County adds 1% and Philadelphia adds 2%, for combined rates of 7% and 8% in those jurisdictions.12Commonwealth of Pennsylvania. Tax Rates
Both states exempt essentials with different lines. Pennsylvania exempts most clothing, food for home consumption, and pharmaceutical drugs.13Commonwealth of Pennsylvania Department of Revenue. Sales, Use and Hotel Occupancy Tax Maryland exempts most grocery food and prescription medications but does tax clothing.
Pennsylvania’s gasoline tax is among the highest in the country at 57.6 cents per gallon.14Commonwealth of Pennsylvania. Motor Fuel Tax Rates Maryland’s is 46.1 cents per gallon as of the July 2024 adjustment.15Maryland Comptroller of Maryland. Motor Fuel Tax Rates Per Gallon – July 2024 Someone driving 15,000 miles a year at 25 miles per gallon pays about $66 more annually in Pennsylvania.
Cigarettes flip the direction. Maryland charges $5.00 per pack, nearly double Pennsylvania’s $2.60.16Commonwealth of Pennsylvania. Cigarette Tax A pack-a-day smoker pays roughly $876 more per year in Maryland cigarette taxes than in Pennsylvania.
Inheritance and Estate Taxes
Both states tax wealth transfers at death, using different mechanisms that produce different results depending on who inherits.
Pennsylvania Inheritance Tax
Pennsylvania imposes an inheritance tax on most assets transferred at death, with the rate set by the beneficiary’s relationship to the deceased:
- Surviving spouse, or parent inheriting from a child under 21: 0%
- Direct descendants and lineal heirs (children, grandchildren): 4.5%
- Siblings: 12%
- All other heirs: 15%
Property owned jointly between spouses is exempt, and farmland transferred to qualifying recipients is exempt.17Department of Revenue | Commonwealth of Pennsylvania. Inheritance Tax There is no exemption threshold for non-spouse beneficiaries. A child inheriting a $500,000 estate owes $22,500 in Pennsylvania inheritance tax; a niece or friend inheriting the same amount owes $75,000. Pennsylvania has no separate estate tax.
Maryland Inheritance and Estate Taxes
Maryland is one of the few states that levies both an inheritance tax and an estate tax. The inheritance tax rate is 10% on property passing to non-exempt beneficiaries.18Register of Wills. Inheritance Tax But the exempt list is broad: spouses, parents, grandparents, children, grandchildren, siblings, and spouses of children and grandchildren all pass free of inheritance tax.19Justia. Maryland Code Tax – General 7-203 – Exemptions The 10% rate applies mainly to more distant relatives, friends, and unrelated beneficiaries.
Maryland’s estate tax applies to the total taxable estate with an exemption of $5 million (effectively $10 million for married couples using portability). Estates below the threshold owe nothing; above it, rates are graduated. Pennsylvania has no estate tax equivalent.
For the common case of parents leaving assets to children, Pennsylvania’s 4.5% inheritance tax produces a higher bill than Maryland’s zero. For someone leaving money to a friend or distant relative, Maryland’s 10% and Pennsylvania’s 15% both take a real bite.
Commuters and the Reciprocity Agreement
Maryland and Pennsylvania have a reciprocity agreement covering wages, salary, and compensation for personal services.20Maryland Comptroller. Maryland Income Tax Administrative Release No. 3 Commuters pay income tax only to the state where they live. A Pennsylvania resident working in Baltimore owes Pennsylvania tax on those wages and no Maryland state income tax, and the reverse applies to a Maryland resident working in Pennsylvania.
To make it work, file a withholding exemption certificate with your employer so the correct state’s tax is withheld. If the wrong state’s tax comes out of your paycheck, you’ll need to file a nonresident return in that state to claim a refund.
The reciprocity agreement covers wages only. It does not cover business income, rental income, investment gains, or other non-wage income earned in the other state. A Maryland resident with rental property in Pennsylvania still files a Pennsylvania nonresident return and pays Pennsylvania tax on the rental income, then claims a credit on the Maryland return to avoid double taxation. Maryland’s credit applies against both state and county income tax, which matters given how substantial county taxes are.21New York Codes, Rules and Regulations. Maryland Tax – General Code 10-703 – Tax Credit for Taxes Paid to Other State The credit is limited to the lesser of the tax actually paid to the other state or the tax that would have been due on that same income in the resident state. Pennsylvania requires taxpayers claiming the credit on Schedule G-L to submit copies of the other state’s return and W-2s, or the credit is denied.22Pennsylvania Department of Revenue. PA Schedule G-L – Resident Credit for Taxes Paid
Which State Costs You Less
The answer depends on your profile. A wage earner making $75,000 in a Maryland county charging 3.00% faces a combined state-and-local income tax rate around 7.5%. A Pennsylvania resident in a typical 1% EIT municipality pays roughly 4.07% on the same wages. Pennsylvania wins that comparison decisively.
A retiree drawing $60,000 from a pension and $20,000 from Social Security pays zero state income tax in Pennsylvania and a meaningful amount in Maryland even after the pension exclusion. A high-income investor realizing large capital gains faces a combined rate above 10% in Maryland versus 3.07% in Pennsylvania.
Maryland’s advantages come in different places. Children and grandchildren inheriting from a Maryland resident owe no state inheritance tax; the same beneficiaries owe 4.5% in Pennsylvania on every dollar. Pennsylvania’s property tax burden is higher on average, and its gasoline tax costs drivers more at every fill-up. Sales tax is a wash at 6%, though Philadelphia and Allegheny County residents pay more.
Neither state is categorically cheaper. Where your income comes from, which county or municipality you live in, and how your estate plan is drawn will tell you which side of the line you belong on.