Maryland taxes are so high because the state stacks several above-average taxes on top of each other: a progressive state income tax that now reaches 6.5%, a mandatory county income tax layered on top, the unusual distinction of being the only state in the country that charges both an estate tax and an inheritance tax, and rising revenue demands tied to a multi-billion-dollar education overhaul. All in, Maryland residents pay roughly 10% of their income in combined state and local taxes, which puts the state around 9th highest in the country.
The Income Tax Is the Main Reason
Nearly half of Maryland’s total tax burden comes from income taxes, and the structure is what makes it bite. The state income tax uses ten brackets running from 2% on the first $1,000 of taxable income up to 6.5% on income above $1 million for single filers (or $1.2 million for joint filers). The 6.5% top rate is new as of the 2025 tax year, when the legislature added two brackets at 6.25% and 6.5% above the old 5.75% ceiling.1Comptroller of Maryland. Withholding Tax Facts 2025 Middle-income earners feel the structure quickly too, because the 4.75% bracket starts at just $3,001 of taxable income.
Then comes the piece that genuinely sets Maryland apart. Every one of the state’s 23 counties and Baltimore City charges its own local income tax, calculated on the same taxable income the state uses. For 2026 these local rates run from 2.25% in Worcester County to 3.30% in Dorchester and Kent counties.2Department of Legislative Services. Local Tax Rates 2026 Most of the big jurisdictions — Baltimore City, Baltimore County, Howard, Montgomery, and Prince George’s — sit at 3.20%. Anne Arundel and Frederick use graduated local rates instead of a flat percentage.
Add the two together and a high earner in a 3.20% county pays a combined state and local income tax rate of 9.70%. Unlike the state tax, the local piggyback applies from the first dollar of taxable income with no separate exemption or standard deduction, so even modest earners feel it immediately. That mandatory double layer, on income, is the single largest reason Maryland’s overall burden looks heavy compared to other states.
The Only State With Both an Estate Tax and an Inheritance Tax
Maryland is the only state in the country that imposes both an estate tax and an inheritance tax. For some families this is purely theoretical; for others it is a serious hit that estate planning in other states would never have to consider.
The estate tax applies to the total value of a deceased person’s estate. Maryland exempts the first $5 million, and estates above that face graduated rates from 0.8% to 16%. It operates independently of the federal estate tax, so a large estate can be taxed at both levels.
The inheritance tax works on the receiving end instead. It charges a flat 10% on the value of what a beneficiary inherits.3Maryland General Assembly. Maryland Code Tax – General 7-204 – Tax Rate It does not apply to close family: spouses, children, grandchildren, parents, grandparents, stepchildren, siblings, and registered domestic partners are all exempt.4Maryland Register of Wills. Inheritance Tax The 10% rate falls on nieces, nephews, aunts, uncles, cousins, friends, and unmarried partners who are not registered. For a large estate passing to non-exempt beneficiaries, the combined bite from both taxes can be significant.
Sales, Excise, and Transaction Taxes Add Up
The headline sales tax is less punishing than people assume. Maryland’s rate is a flat 6% statewide with no local add-on,5Comptroller of Maryland. Maryland Sales and Use Tax 6% Rate Chart which is actually lower than the combined rates in many states where local jurisdictions push the total above 9%. Groceries for home use and prescription drugs are exempt.
Specific categories carry higher rates. Alcoholic beverages are taxed at 9% instead of 6%, cannabis at 12%, electronic smoking devices at 20%, and vaping liquid at 60%. Digital products — e-books, streaming video and music, online games, in-app purchases, downloads of almost any kind — are subject to the standard 6% sales tax.6Comptroller of Maryland. Business Tax Tip 29 – Sales of Digital Products and Digital Code
On top of those, excise taxes apply to several categories. The gasoline excise tax is about 46 cents per gallon and adjusts annually, sitting well above the national average.7Comptroller of Maryland. Motor Fuel Tax Rates Effective July 1, 2024 Alcohol carries per-gallon excise taxes separate from the 9% sales tax: $1.50 for distilled spirits, $0.40 for wine, and $0.09 for beer.8Maryland General Assembly. Maryland Code Tax – General 5-105 – Tax Rates Vehicles titled in Maryland pay a 6.5% excise tax on the purchase price as of July 1, 2025, up from 6% the previous year.9Maryland.gov. Industry Bulletin – HB 352 BRFA 2025 Changes
Buying a house triggers more. The state collects a 0.5% transfer tax on real estate transactions, cut to 0.25% for first-time Maryland homebuyers, and many counties add their own transfer tax on top.10Maryland Courts. Recording Fees A separate recordation tax applies to deeds and mortgage documents, with county supplements that vary by jurisdiction. On a mid-priced home purchase these can easily add several thousand dollars at closing.
Property Taxes Are Not the Villain
Property taxes often get blamed for Maryland’s reputation, but the numbers tell a different story. The statewide effective property tax rate is around 0.92%, which places Maryland near the middle of the national range rather than near the top. The dollar amounts can still feel large in high-value markets like Howard and Montgomery counties because home prices there are high, but the rate itself is not the outlier.
Two relief programs can soften the bill. The Homestead Tax Credit caps how fast your home’s taxable assessment can grow each year — the state ceiling is 10%, and many counties set a lower cap.11Maryland Department of Assessments and Taxation. Homestead Tax Credit The credit requires a one-time application, and a new owner has to re-enroll. The Homeowners’ Property Tax Credit offers income-based relief for households with combined gross income of $60,000 or less and must be reapplied for each year.12Maryland OneStop. Homeowners’ Property Tax Credit Application Form HTC 2026
Why the Rates Keep Climbing
The biggest force pushing Maryland taxes higher in recent years is the Blueprint for Maryland’s Future, a long-term education reform plan phasing in through fiscal year 2034. Once fully implemented, it is projected to add $3.9 billion annually to state education spending over pre-Blueprint levels.13Department of Legislative Services. Local Fiscal Impact of Implementing the Blueprint for Maryland’s Future Local governments have to raise their own education spending as well, and property and income taxes together supply about 90% of local tax revenue. That requirement feeds directly back into the county income tax rates that already make Maryland distinctive.
Transportation is the other big driver. Maryland funds an extensive network of roads, bridges, and transit — the Washington Metro, MARC commuter rail, and Baltimore’s light rail among them — along with public safety, healthcare, and environmental programs. Proximity to Washington, D.C., and a relatively affluent population drive up both service expectations and labor costs in ways that lower-cost states do not face. Maryland taxes heavily because Maryland spends heavily, and the spending is concentrated in areas where costs tend to outrun inflation.
What Takes Some of the Edge Off
A few parts of the tax code work in residents’ favor and are worth knowing about if you are trying to figure out where you actually land.
Social Security benefits are completely exempt from Maryland state income tax, no matter how high your income is, and you do not have to count Social Security toward the minimum filing threshold.14Comptroller of Maryland. Technical Bulletin 51 – Senior Citizens and Maryland Income Tax Maryland also allows a pension exclusion for residents who are at least 65 or totally disabled. The maximum exclusion is tied to the largest annual Social Security benefit, which was $41,200 for the 2025 tax year, and it is reduced dollar-for-dollar by any Social Security or Railroad Retirement benefits you receive.15Maryland General Assembly. Fiscal and Policy Note for House Bill 13 For a retiree with a solid pension and modest Social Security, the exclusion can meaningfully trim the state income tax bill. For someone whose Social Security alone approaches the cap, there may be little left to exclude.
For most working residents, though, the arithmetic that defines Maryland is the one at the top: a progressive state income tax, a mandatory county income tax layered on top of it, death taxes other states don’t charge, and an education funding commitment that keeps the pressure on rates going up rather than down.