Several new taxes in Maryland took effect between July 2024 and July 2025, and more increases are scheduled. Cigarette and vaping taxes climbed sharply, vehicle registration fees rose across every weight class, the recreational cannabis rate went from 9% to 12%, and two counties adopted graduated local income tax brackets. Maryland’s estate tax exemption stayed frozen at $5 million while the federal exemption pulled further away. Here is what actually changed and how it lands on you.
Cigarettes, Vaping, and Other Tobacco
On July 1, 2024, the excise tax on a pack of 20 cigarettes rose from $3.75 to $5.00, putting Maryland among the higher cigarette tax states.1Maryland General Assembly. Maryland Code Tax-General 12-105 – Tax Rates The tax on other tobacco products, excluding pipe tobacco and cigars, moved from 53% to 60% of the wholesale price.2Comptroller of Maryland. Cigarettes, Other Tobacco Products, and Electronic Smoking Devices – July 1, 2024, Tax Rate Changes
Vaping is taxed differently. Instead of a fixed excise, Maryland applies a sales and use tax to electronic smoking devices, and that rate jumped from 12% to 20% on vaping liquid in containers larger than five milliliters and on vaping hardware.2Comptroller of Maryland. Cigarettes, Other Tobacco Products, and Electronic Smoking Devices – July 1, 2024, Tax Rate Changes Smaller containers may be taxed at the standard sales tax rate rather than 20%, so container size matters at the register.
Crossing state lines to save money has limits. You can import no more than five cartons of cigarettes per person, and going over that threshold is a felony. Buying cigarettes over the internet is illegal in Maryland. Other tobacco products purchased from out-of-state retailers may require you to report and pay the tax quarterly yourself if the seller didn’t collect it.3Comptroller of Maryland. Tobacco FAQs
Recreational Cannabis
The sales and use tax on adult-use cannabis rose from 9% to 12% on July 1, 2025, under the Budget Reconciliation and Financing Act of 2025.4Comptroller of Maryland. Maryland Collects $26.8 Million in Cannabis Tax Revenue July Through September 2025 The 12% rate applies at licensed dispensaries and is added to the retail price. Medical cannabis is taxed separately, so the increase applies only to recreational sales.
Vehicle Registration Fees
Biennial vehicle registration fees rose on July 1, 2024, with some weight classes seeing increases of 60% or more. Passenger vehicles now fall into three tiers:
- Up to 3,500 pounds: $221 every two years
- 3,500 to 3,700 pounds: $241 every two years
- Over 3,700 pounds: $323 every two years
Additional increases for some vehicle classes are scheduled for July 1, 2026. The fee package includes $40 per vehicle for the state’s emergency medical system and the Maryland Trauma Physician Services Fund.
Electric and Plug-In Hybrid Surcharges
Starting with registrations expiring in January 2025, zero-emission vehicles carry an annual $125 surcharge and plug-in hybrids a $100 surcharge.5Maryland Motor Vehicle Administration. Fees and Payment Options Because these vehicles pay little or no gasoline tax, the surcharges recover some of that lost road funding. They are separate from the biennial fee, so you pay both. Unpaid registration fees or surcharges can lead to a suspended registration.
Local Income Tax Changes
Every Maryland county and Baltimore City levies a local income tax on top of the state rate. The statutory floor is 2.25%, and the ceiling was recently lifted from 3.20% to 3.30%.6Maryland General Assembly. Maryland Code Tax-General 10-106 – County Income Tax For 2026, county rates run from 2.25% in Worcester County up to 3.30% in Dorchester and Kent counties, with most jurisdictions sitting at 3.20%.7Maryland Department of Legislative Services. 2026 County Local Tax Rates
Two counties have moved away from a single flat rate. Anne Arundel and Frederick counties now apply graduated local rates that vary by income, similar in shape to federal brackets. In Anne Arundel, a single filer pays 2.70% on income up to $50,000 and 3.20% on income above $400,000.8Maryland Comptroller. 2026 Maryland State and Local Income Tax Withholding Information Higher earners in those counties pay more; lower earners pay less than they did under the old flat structure. More counties may adopt this model.
If You Live Out of State and Work in Maryland
Nonresidents pay a flat 7.0% state withholding on Maryland-source income, which includes a 2.25% nonresident tax that stands in for the local tax residents pay. The location of your Maryland employer doesn’t change that rate, and nonresidents can’t claim the lower local rates that some counties offer their own residents.
Estate and Inheritance Tax
Maryland is one of the few states that imposes both an estate tax and a separate inheritance tax, and this is the area where planning matters most.
The $5 Million Estate Tax Exemption
Maryland’s estate tax exemption is fixed at $5 million per individual and is not indexed for inflation.9Maryland General Assembly. Maryland Code Tax-General 7-309 – Estate Tax The federal exemption, by contrast, rose to roughly $13.99 million per person for 2025 and continues to grow. An estate of $8 million could owe nothing federally and still owe Maryland estate tax on the amount above $5 million.
Maryland does allow a deceased spousal unused exclusion, a form of portability. If the first spouse to die doesn’t use the full $5 million, the survivor can claim the unused portion, potentially sheltering up to $10 million. Preserving that option requires the first spouse’s estate to file a Maryland estate tax return and make an irrevocable election.9Maryland General Assembly. Maryland Code Tax-General 7-309 – Estate Tax It is easy to skip this filing when the first estate falls under the threshold, and the missed election can cost the survivor millions in lost exemption later.
Who Pays the 10% Inheritance Tax
Separate from the estate tax, Maryland imposes a 10% inheritance tax on the clear value (fair market value minus expenses) of property passing from a decedent.10Maryland General Assembly. Maryland Code Tax-General 7-204 – Rate of Inheritance Tax Close family are entirely exempt: spouses, parents, grandparents, children, grandchildren, stepchildren, stepparents, and siblings pay nothing.11Comptroller of Maryland. Estate and Inheritance Tax Information The 10% rate applies to everyone else, including nieces, nephews, friends, and unmarried partners (unless they co-owned their primary residence as joint tenants). If your plans leave assets to someone outside the exempt list, factor the inheritance tax into the amount you actually want them to receive.
Digital Advertising Tax
Maryland was the first state to tax revenue from digital advertising services, and the tax remains in effect. It applies only to companies with at least $100 million in global annual gross revenues, so most Maryland residents and small businesses will never owe it. The tiered rate runs from 2.5% on the assessable base for companies with $100 million to $1 billion in worldwide revenue up to 10% for those over $15 billion. The assessable base is the Maryland-derived portion of digital ad revenue, not the company’s global total.12Comptroller of Maryland. Technical Bulletin 59 – Digital Advertising Gross Revenues Tax The statute bars companies from passing the tax to customers as a separate line item.13Maryland General Assembly. Maryland Code Tax-General 7.5-102
How These Add Up on Your Federal Return
Every state and local tax increase interacts with the federal SALT deduction cap. Under the One Big Beautiful Bill Act of 2025, the SALT cap rose from $10,000 to $40,000 for joint filers in 2025, with small annual increases through 2029. For 2026, the cap is $40,400, or $20,200 if married filing separately. The deduction phases down for taxpayers with modified adjusted gross income above $400,000.
For Maryland residents in counties near the top of the local rate range, especially those also paying significant property taxes, total state and local taxes can push past the cap. Anything over the cap effectively becomes a non-deductible cost federally. Weigh that against the standard deduction before assuming itemizing is still the right call.