The Maryland estate tax is a state-level tax on estates worth more than $5 million, charged at graduated rates that start at 0.8% and top out at 16%. It is separate from the federal estate tax and separate from Maryland’s inheritance tax, which can apply to the same death. The executor files a Maryland return and pays any tax due within nine months of the date of death.
Who Owes the Tax and How Much
Estates valued at less than $5 million owe nothing. For estates above that line, the tax applies only to the amount over $5 million, using a graduated schedule tied to the former federal state death tax credit under Internal Revenue Code § 2011, which Maryland kept after Congress phased it out.1Maryland General Assembly. Maryland Code Tax-General 7-309
The brackets start at 0.8% on the first $40,000 above the exemption and climb through nine tiers. The 16% top rate only reaches estates above roughly $15 million, because it applies to the portion more than $10,040,000 over the exemption.
Two worked examples make the shape clear. An estate worth $6 million has $1 million above the exemption and owes roughly $38,800. An estate worth $10 million, with $5 million above the exemption, owes around $290,800.
A Maryland return is required when the federal gross estate plus adjusted taxable gifts equals or exceeds $5 million, and the decedent was either a Maryland resident or a nonresident who owned real or tangible personal property in the state.2Comptroller of Maryland. Maryland Estate Tax For Maryland residents, the gross estate includes everything they owned wherever located; for nonresidents, only Maryland real estate and tangible personal property count.
Maryland’s Separate Inheritance Tax
This is the piece most people miss. Maryland imposes an inheritance tax on top of the estate tax, and the two work differently. The estate tax is calculated on the total value of the estate. The inheritance tax falls on individual beneficiaries based on their relationship to the person who died.
Close family pays nothing. The following beneficiaries are fully exempt:
- Surviving spouse or registered domestic partner
- Children, grandchildren, and great-grandchildren
- Parents and grandparents
- Siblings
- Spouse of a child
- Tax-exempt organizations under IRC § 501(c)(3)
Everyone else pays 10% on what they receive. That includes nieces, nephews, aunts, uncles, cousins, friends, and unmarried partners who are not registered domestic partners.3Maryland Register of Wills. Inheritance Tax
A few property categories are also exempt no matter who receives them: life insurance proceeds payable to a named beneficiary (not the estate), property passing through a small estate proceeding, and property totaling $1,000 or less going to any single person.3Maryland Register of Wills. Inheritance Tax
Inheritance tax paid can reduce the estate tax liability, so for estates large enough to owe both, the inheritance tax essentially comes off the top of what would otherwise go to estate tax. But estates under the $5 million estate tax threshold still owe 10% inheritance tax on anything passing to collateral heirs.
Portability Between Spouses
Maryland allows portability of the $5 million exemption between spouses. If the first spouse to die doesn’t use the full exclusion, the unused portion transfers to the surviving spouse, which can shield up to $10 million for a married couple.1Maryland General Assembly. Maryland Code Tax-General 7-309
Here is the trap: to preserve portability, the executor must file a Maryland estate tax return after the first spouse’s death even when no tax is owed. Skip that filing and the surviving spouse loses the unused exemption permanently. The transferred amount is called the deceased spousal unused exclusion amount, and only the exemption from the most recent deceased spouse carries over.1Maryland General Assembly. Maryland Code Tax-General 7-309
Filing the Return and Paying
The executor files Form MET-1, the Maryland Estate Tax Return, directly with the Comptroller of Maryland. Returns are mailed to the Revenue Administration Division, Estate Tax Unit in Annapolis. The deadline is nine months from the date of death.4Register of Wills. Maryland Estate Tax Tip 42
Every asset is valued at fair market value as of the date of death, and professional appraisals are standard for real estate, business interests, and anything without a readily verifiable market price. A completed federal Form 706 with all schedules and supporting documents must be included with the state return, even for estates that owe no federal tax.4Register of Wills. Maryland Estate Tax Tip 42
Extensions
If more time is needed, Form MET-1E requests an extension from the Comptroller. The standard extension runs up to six months. Executors outside the United States can receive up to one year. If the IRS grants a later federal filing deadline, Maryland matches it automatically.5New York Codes, Rules and Regulations. Maryland Code Tax-General 7-305.1 – Extension of Time to File Estate Tax Return
An extension to file is not an extension to pay. Interest accrues on any unpaid tax from the original nine-month deadline, approved extension or not.
Tax Clearance
Once the Comptroller processes the return and confirms payment, the estate receives a tax clearance certificate. The Register of Wills requires that certificate before authorizing final distribution to beneficiaries, which means the estate cannot close in probate without it. Processing can take several weeks, so build that time into the administration schedule.
Penalties for Missing the Deadline
Maryland charges a penalty of up to 10% on any estate tax not paid by the due date. Interest also accrues on unpaid balances from the statutory deadline, regardless of whether the executor has an approved extension or alternative payment arrangement.6Maryland Register of Wills. Maryland Estate Tax Pamphlet
Federal late-payment penalties run 0.5% of unpaid tax per month up to a 25% maximum, reduced to 0.25% monthly if an approved federal payment plan is in place.7Internal Revenue Service. Failure to Pay Penalty Estates that owe both state and federal tax face charges from both jurisdictions when they fall behind.
How Maryland Differs from the Federal Estate Tax
Maryland’s $5 million exemption is far below the federal threshold, which stands at $15 million for 2026 after passage of the One, Big, Beautiful Bill Act.8Internal Revenue Service. What’s New – Estate and Gift Tax The gap matters in practice. An $8 million estate owes zero federal estate tax but faces a Maryland bill on $3 million above the state exemption. The federal rate tops out at 40%; Maryland’s maximum is 16%.
Because the thresholds are so different, many Maryland estates owe state tax without owing anything to the IRS. Those executors still complete Form 706 as a supporting document for the Maryland return, since the federal form supplies the asset valuations and deductions Maryland uses to compute its tax.4Register of Wills. Maryland Estate Tax Tip 42
Ways to Reduce the Tax
Marital Deduction
Property passing outright to a surviving spouse qualifies for an unlimited marital deduction under both federal and Maryland law, so it is excluded from the taxable estate entirely. The tax is deferred rather than eliminated, since it may apply when the surviving spouse dies, but combined with portability it gives married couples real room to plan around the $5 million line.
Annual Gifting
Every dollar given away during life is a dollar not in the estate at death. The federal annual gift tax exclusion lets you give up to $19,000 per recipient in 2026 without triggering gift tax or using any lifetime exemption.8Internal Revenue Service. What’s New – Estate and Gift Tax A married couple can give $38,000 per recipient by splitting gifts. Over years, consistent gifting to children and grandchildren moves significant wealth out of a taxable estate.
Direct Tuition and Medical Payments
Payments made directly to a school for someone’s tuition, or directly to a medical provider for someone’s care, are exempt from gift tax with no dollar cap. They do not count against the $19,000 annual exclusion. The payment has to go straight to the institution, not to the student or patient. Tuition means tuition only, not room, board, or books. Medical expenses include insurance premiums paid on another person’s behalf.9eCFR. 26 CFR 25.2503-6 – Exclusion for Certain Qualified Transfer for Tuition or Medical Expenses
Lifetime Exemption
The federal lifetime gift and estate tax exemption is $15 million for 2026.8Internal Revenue Service. What’s New – Estate and Gift Tax Gifts above the $19,000 annual exclusion reduce the lifetime exemption dollar for dollar but incur no immediate tax until the exemption is used up. Maryland does not impose its own gift tax, so lifetime gifts shrink the Maryland gross estate without any state-level gift tax consequence. For estates well above $5 million, large lifetime gifts can be one of the most effective ways to bring the taxable estate below the Maryland threshold.
The state and federal systems interact in ways that are not always obvious, and portability depends on filings that are easy to overlook. For any estate approaching the $5 million mark, guidance from an estate attorney or tax advisor familiar with Maryland’s dual-tax system is worth the cost.