Maryland — Personal Income Tax

Maryland residents must file a personal income tax return if they are required to file a federal income tax return or if their gross income exceeds the filing threshold for their filing status and age. Maryland generally follows federal filing thresholds. A resident includes any individual domiciled in Maryland on the last day of the taxable year, or any individual who maintains a place of abode in Maryland for more than six months and is physically present in the state for 183 days or more during the taxable year, even if domiciled elsewhere. Residents file Form 502. Part-year residents also file Form 502 and report income earned during the period of Maryland residency.

Source: Md. Tax-Gen. Code Ann. § 10-801; Md. Tax-Gen. Code Ann. § 10-101(k); Maryland Administrative Release No. 37

Maryland imposes a progressive state income tax on individuals with ten brackets. For single filers, rates range from 2% on the first $1,000 of taxable income to 6.50% on taxable income exceeding $1,000,000. The intermediate brackets are 3% ($1,001–$2,000), 4% ($2,001–$3,000), 4.75% ($3,001–$100,000), 5% ($100,001–$125,000), 5.25% ($125,001–$150,000), 5.5% ($150,001–$250,000), 5.75% ($250,001–$500,000), and 6.25% ($500,001–$1,000,000). Married couples filing jointly, surviving spouses, and heads of household use the same ten rates but with different income thresholds.

Source: Md. Tax-Gen. Code Ann. § 10-105

Maryland is one of the few states that imposes mandatory local income taxes in addition to the state income tax. Each of Maryland's 23 counties and Baltimore City sets its own local income tax rate by ordinance or resolution. Counties must impose a minimum rate of 2.25% and may impose a maximum rate of 3.30% of an individual's Maryland taxable income, effective for tax years beginning after December 31, 2024. Counties may change rates in increments of one one-hundredth of a percentage point. Since 2022, counties have been authorized to apply the local income tax on a graduated bracket basis rather than a flat rate. Local tax is based on the taxpayer's county of residence, not where they work.

Source: Md. Tax-Gen. Code Ann. § 10-106; Maryland Tax Alert (2025 Legislative Session)

For tax years beginning after December 31, 2024, Maryland allows a standard deduction of $3,350 for single filers and married individuals filing separately. Joint filers, heads of household, and surviving spouses may deduct $6,700. Beginning with tax years after December 31, 2025, these amounts will be indexed annually for inflation using the federal cost-of-living adjustment under IRC § 1(f)(3).

Maryland election independent of federal choice

Md. Tax-Gen. Code Ann. § 10-217(a)(1)(i) provides that an individual may elect to use the Maryland standard deduction to compute Maryland taxable income whether or not the individual itemizes deductions on the federal income tax return. This means a taxpayer who itemizes on the federal return may choose either the Maryland standard deduction or Maryland itemized deductions, whichever provides a greater benefit. Maryland's decoupling from the federal election allows taxpayers who itemize federally—particularly those affected by the federal $10,000 state and local tax deduction cap—to compare their post-adjustment Maryland itemized deductions to the flat Maryland standard deduction amounts and elect the more favorable option.

Restriction when federal standard deduction is elected

Md. Tax-Gen. Code Ann. § 10-217(a)(1)(ii) prohibits Maryland itemization when the taxpayer elects the federal standard deduction. The statute states: "If an individual elects to use the standard deduction on the federal income tax return, the individual may not take any itemized deduction in § 10-218 of this subtitle." A taxpayer who takes the federal standard deduction must also use the Maryland standard deduction; Maryland itemization is not permitted in that scenario. This restriction operates in only one direction. A taxpayer who itemizes federally retains the choice to itemize or take the standard deduction on the Maryland return, but a taxpayer who takes the federal standard deduction has no such choice and must use the Maryland standard deduction.

Interaction with itemized deduction phase-out

For taxpayers with federal adjusted gross income exceeding $200,000 ($100,000 for married filing separately), Maryland applies a 7.5% itemized deduction phase-out. Taxpayers in this income range who itemize federally should calculate their Maryland itemized deductions after application of the phase-out reduction and compare the result to the applicable Maryland standard deduction. If the phase-out reduction brings the net Maryland itemized deductions below the standard deduction amount, the standard deduction will provide a greater benefit. A taxpayer who takes the federal standard deduction is subject to the § 10-217(a)(1)(ii) prohibition and must use the Maryland standard deduction regardless of income level or phase-out applicability.

Source: Md. Tax-Gen. Code Ann. § 10-217(b), (a)(1), (c)

Maryland nonresidents must file Form 505 (Maryland Nonresident Income Tax Return) if they have Maryland-sourced income and are required to file a federal income tax return. Md. Tax-Gen. Code Ann. § 10-806(a) imposes a filing requirement on any nonresident who derives income from Maryland sources, unless explicitly exempted. The statute provides two key exceptions, discussed below.

Maryland-sourced income categories

A nonresident's Maryland taxable income is determined under Md. Tax-Gen. Code Ann. § 10-102.1(6), which defines "nonresident taxable income" as any income described in § 10-210(b)(1) through (4). COMAR 03.04.02.06 implements these categories by requiring nonresidents to include in Maryland adjusted gross income: income derived from real or tangible personal property permanently located in Maryland; income from a business, trade, profession, or occupation carried on in Maryland; and income derived from Maryland wagering. Pass-through entity income attributable to Maryland sources is also included. The regulation specifies that nonresidents must add back any loss or adjustment to income that is not attributable to sources within Maryland.

Business income filing threshold

Md. Tax-Gen. Code Ann. § 10-806(d)(1) creates a specific filing rule for nonresidents with Maryland business income. A nonresident individual who is not otherwise required to file must file a return if the individual: (i) is not a dependent; (ii) is required to file a federal income tax return; and (iii) has income or losses derived from a business, occupation, profession, or trade carried on in Maryland. This provision applies to self-employment income, partnership distributive shares, and S corporation pro rata shares derived from Maryland business activity.

Reciprocal wage exemption

Under Md. Tax-Gen. Code Ann. § 10-806(d)(2), a nonresident is not required to file a Maryland return if: (i) the individual's only income in Maryland is wages, as defined in § 10-905(f), that are earned in Maryland; and (ii) the Comptroller and the state in which the nonresident resides have agreed in writing to allow a reciprocal exemption from tax and withholding for wages of residents of each state earned in the other state. Maryland maintains reciprocal agreements with Pennsylvania, Virginia, West Virginia, and the District of Columbia, as documented in Administrative Release No. 37. The exemption applies only to wages; nonresidents with other Maryland-sourced income—such as business income, rental income, or gambling winnings—remain subject to Maryland's filing requirement even if they reside in a reciprocal state.

County-level filing requirements

Md. Tax-Gen. Code Ann. § 10-806(c) imposes a separate filing requirement for county income tax purposes. A nonresident who derives income from salary, wages, or other compensation for personal services for employment in a county must file an income tax return, unless the Comptroller determines that each locality in which the nonresident resides: (1) imposes no tax on the income of a Maryland resident derived from wages for employment in that locality; (2) exempts that income from its tax on income; or (3) allows a credit for that income and exempts it from withholding. Administrative Release No. 37 addresses this county-level reciprocity, noting that certain nonresidents working in Maryland counties but residing in jurisdictions that tax Maryland residents' wages earned there may file Form 515 to reconcile local income tax withholding instead of Form 505.

Source: Md. Tax-Gen. Code Ann. § 10-806; Md. Tax-Gen. Code Ann. § 10-102.1; COMAR 03.04.02.06; Maryland Administrative Release No. 37

Maryland individual income tax returns are due on or before April 15 of the year following the taxable year for calendar-year filers. For fiscal-year filers, the return must be filed on or before the 15th day of the fourth month after the end of the fiscal year. Md. Tax-Gen. Code Ann. § 10-820(a)(1) establishes these deadlines. A special rule applies to individuals who file electronically and electronically pay any balance due: if the federal income tax return deadline for electronic filing is later than April 15, Maryland conforms to that later federal deadline. Md. Tax-Gen. Code Ann. § 10-820(a)(3).

Automatic six-month extension

Maryland grants an automatic six-month extension of time to file, moving the filing deadline from April 15 to October 15 for calendar-year filers. Taxpayers who have obtained a valid federal extension by filing IRS Form 4868 automatically receive a Maryland extension without filing a separate state form, provided they owe zero Maryland income tax. If a taxpayer owes Maryland tax, they must file Maryland Form 502E (Application for Extension to File Personal Income Tax Return) on or before the original due date and remit payment with the extension form. Taxpayers who owe zero Maryland tax and do not have a federal extension must request the Maryland extension by telephone (410-260-7829 from central Maryland, or 1-800-260-3664 from elsewhere) or electronically through the Maryland Tax Connect portal (interactive.marylandtaxes.gov).

Payment deadline not extended

An extension of time to file is not an extension of time to pay. All Maryland income tax payments remain due on the original filing deadline, regardless of whether an extension has been granted. Any tax not paid by April 15 (or the applicable original due date for fiscal-year filers) is subject to interest and penalties. Taxpayers who receive an extension to file must still estimate their tax liability and pay any amount owed by the original due date to avoid late-payment penalties.

Fiscal-year filers

Partnerships that are dissolved, liquidated, or withdraw from Maryland must file an income tax return within 60 days after the date of dissolution, liquidation, or withdrawal. Md. Tax-Gen. Code Ann. § 10-820(a)(2). Individuals with at least two-thirds of estimated gross income from fishing or farming (including oyster farming) may file their declaration of estimated income tax on or before January 15 of the following taxable year, or file an income tax return on or before March 1 of the following taxable year. Md. Tax-Gen. Code Ann. § 10-820(c).

Source: Md. Tax-Gen. Code Ann. § 10-820; Maryland Comptroller Press Release (April 15, 2026)

Maryland imposes an additional 2% tax on net capital gains for individuals whose federal adjusted gross income (FAGI) exceeds $350,000, effective for tax years beginning after December 31, 2024. The surtax is imposed in addition to the regular state and local income tax rates. Md. Tax-Gen. Code Ann. § 10-105(a)(3)(i) applies this additional tax to individuals described in subsections (a)(1) and (a)(2)—single filers, married individuals filing separately, married couples filing jointly, surviving spouses, and heads of household. The statute defines "individual" to include natural persons and fiduciaries under Md. Tax-Gen. Code Ann. § 10-101(g); Technical Bulletin No. 58 clarifies that the surtax applies to individuals and fiduciaries (estates and trusts with undistributed capital gains) but not to corporations. The $350,000 FAGI threshold applies to all filing statuses without adjustment; Technical Bulletin No. 58 confirms there is no separate threshold for married couples filing jointly.

Calculation of the surtax

The surtax is calculated as 2% of the amount of net capital gain included in the individual's Maryland adjusted gross income. Maryland adjusted gross income equals federal adjusted gross income, further adjusted by Maryland additions and subtractions under Md. Tax-Gen. Code Ann. §§ 10-203 and 10-210. Net capital gain is determined under the Internal Revenue Code—the same definition used for federal income tax purposes. Both short-term and long-term capital gains are included in net capital gain subject to the surtax; Maryland does not distinguish between the two for purposes of the additional 2% tax.

Exclusions from the surtax

Md. Tax-Gen. Code Ann. § 10-105(a)(3)(ii) excludes six categories of capital gain from the 2% additional tax, to the extent those gains are included in calculating net capital gain for federal income tax purposes. The statute text specifies:

1. Primary residence sales under $1.5 million. "Any residential dwelling sold for less than $1,500,000 that is the individual's primary residence, including the land on which the dwelling is located and any accessory dwelling unit associated with the residence, if the dwelling is a single-family home, a town house, a row home, a residential condominium unit, or a residential cooperative unit."

1. Retirement accounts. "Assets held in: A. a cash or deferred arrangement plan under § 401(k) of the Internal Revenue Code; B. a tax-sheltered annuity or custodial account under § 403(b) of the Internal Revenue Code; C. a deferred compensation plan under § 457(b) of the Internal Revenue Code; D. an individual retirement account or individual retirement annuity under § 408 of the Internal Revenue Code; E. a Roth individual retirement account under § 408A of the Internal Revenue Code; or F. a defined contribution plan, a defined benefit plan, or a similar retirement savings plan."

1. Livestock held by farmers or ranchers. "Cattle, horses, or breeding livestock held for more than 12 months if, for the taxable year of the sale or exchange, more than 50% of the individual's gross income for the taxable year, including income from the sale or exchange of capital assets, is from farming or ranching."

1. Land subject to preservation easements. "Land that is subject to a conservation, agricultural, or forest preservation easement or that will be subject to a conservation, agricultural, or forest preservation easement within 90 days after the date of the sale or exchange of the land."

1. Section 179 eligible property. "Property the cost of which is deductible under § 179 of the Internal Revenue Code." This exemption covers tangible business property qualifying for immediate expensing under IRC § 179, not the broader category of depreciated property.

1. Affordable housing owned by nonprofits. "Affordable housing owned by a nonprofit organization." The statute does not define "affordable housing" or "nonprofit organization" for this purpose; practitioners should consult additional guidance or assume the terms carry their ordinary meanings under Maryland housing and nonprofit law.

Application to pass-through entities and fiduciaries

Technical Bulletin No. 58 explains that capital gain income earned by a pass-through entity is not subject to the additional tax at the entity level. When a pass-through entity distributes net capital gain income to an individual member whose FAGI exceeds $350,000, the capital gain is subject to the 2% tax at the member level. The pass-through entity must separately report income attributable to capital gain on Form 510/511 Schedule K-1 so that members can report their share on their individual returns. Similarly, when a fiduciary distributes net capital gain income to a beneficiary whose FAGI exceeds $350,000, the distributed gain is subject to the surtax on the beneficiary's return. Fiduciaries (estates and trusts) that retain net capital gain and have federal taxable income in excess of $350,000 must complete Maryland Form 504CG to determine the net capital gain subject to the additional 2% tax at the fiduciary level; the surtax is then included in the total Maryland tax reported on Form 504.

Reporting

Technical Bulletin No. 58 specifies the reporting forms. Individuals with FAGI exceeding $350,000 who have net capital gain included in Maryland adjusted gross income must complete Maryland Form 502CG (Capital Gain Income) to calculate the net capital gain subject to the 2% surtax. The additional tax calculated on Form 502CG is carried to Maryland Form 502 (or Form 505 for nonresidents), where it is included in Total Maryland Tax. Fiduciaries use Form 504CG and carry the additional tax to Form 504.

Source: Md. Tax-Gen. Code Ann. § 10-105(a)(3); Md. Tax-Gen. Code Ann. § 10-101(g); Maryland Comptroller Technical Bulletin No. 58 (Dec. 29, 2025)

Maryland requires taxpayers with federal adjusted gross income (FAGI) exceeding $200,000 ($100,000 for married individuals filing separately) to reduce their otherwise allowable itemized deductions by 7.5% of the amount by which their FAGI exceeds those thresholds. This limitation took effect for tax years beginning after December 31, 2024, as part of the Budget Reconciliation and Financing Act of 2025. The Maryland Comptroller's Tax Alert, published following the 2025 legislative session, explains the mechanics of the phase-out and its interaction with the standard deduction.

Calculation of the limitation

The reduction amount equals 7.5% multiplied by the excess of the taxpayer's FAGI over the applicable threshold. For a married couple filing jointly with $400,000 of FAGI, the excess FAGI is $200,000 ($400,000 minus the $200,000 threshold). The phase-out reduction is therefore $15,000 (7.5% × $200,000). If this couple had $50,000 of otherwise allowable Maryland itemized deductions before the limitation, their itemized deductions would be reduced to $35,000 ($50,000 minus $15,000).

The limitation applies to itemized deductions claimed under Md. Tax-Gen. Code Ann. § 10-218, which generally follow federal itemized deductions with certain modifications. Maryland disallows deductions for state and local income taxes paid (only property taxes and sales taxes may be deducted for Maryland purposes) and disallows deductions for contributions of a preservation or conservation easement for which a Maryland income tax credit is claimed.

Application before comparison to standard deduction

The itemized deduction limitation reduces the taxpayer's otherwise allowable itemized deductions before those reduced deductions are compared to the standard deduction. Maryland taxpayers may claim the greater of their standard deduction or their itemized deductions after application of the phase-out limitation. In the example above, the couple would compare the post-limitation itemized deduction amount of $35,000 to the applicable standard deduction of $6,700 for joint filers (for tax year 2025) and would claim $35,000 in itemized deductions because it exceeds the standard deduction. The Tax Alert explains that the standard deduction will be used if the itemized deduction amount after the phase-out reduction falls below the standard deduction, even by $1.

Break-even analysis

The phase-out creates a "break-even" point—the level of pre-limitation itemized deductions at which the phase-out reduction pushes the net itemized deduction amount down to the standard deduction. For a couple with $400,000 FAGI and a $15,000 phase-out reduction, their pre-limitation itemized deductions would need to exceed $21,700 for their post-limitation itemized deductions to exceed the $6,700 standard deduction ($21,700 minus $15,000 equals $6,700). If their pre-limitation itemized deductions were $21,700 or less, the standard deduction would provide a greater benefit.

Threshold amounts by filing status

The Tax Alert specifies that the $200,000 FAGI threshold applies to taxpayers filing as single, married filing jointly, head of household, or qualified surviving spouse. Married individuals filing separately use a $100,000 FAGI threshold. The HB 411 fiscal note from the 2026 legislative session confirms these thresholds and states they are not indexed for inflation; the thresholds remain fixed at $200,000 and $100,000 for future tax years unless amended by subsequent legislation.

Relationship to former federal Pease limitation

The Maryland limitation is structurally similar to the former federal "Pease limitation" that reduced federal itemized deductions by 3% of the amount by which AGI exceeded a threshold, applicable to federal returns for tax years before 2018. Maryland's 7.5% reduction rate is 2.5 times the former federal rate, making the Maryland phase-out substantially more aggressive. The federal Pease limitation was repealed after 2017 by the Tax Cuts and Jobs Act. The HB 411 fiscal note characterizes the Maryland provision as bringing back a "Pease-like" limitation at the state level with a higher reduction percentage and different income thresholds.

Interaction with standard deduction election rules

Md. Tax-Gen. Code Ann. § 10-217(a)(1)(ii) continues to provide that if an individual elects to use the standard deduction on the federal income tax return, the individual may not take any itemized deduction in Maryland under § 10-218. The Tax Alert does not explicitly address whether the BRFA of 2025 modified this longstanding rule. Practitioners whose clients claim the federal standard deduction but wish to itemize on the Maryland return (to take advantage of Maryland's allowance of itemized deductions for taxpayers who do not itemize federally) should consult current Maryland Comptroller guidance to confirm whether this federal-standard-deduction bar remains in effect for tax years beginning after December 31, 2024, or whether the BRFA of 2025 modified § 10-217(a)(1)(ii) alongside the new itemized deduction phase-out and revised standard deduction amounts.

Source: Maryland Tax Alert—Changes to Standard and Itemized Deductions and to State and Local Income Tax Rates from the 2025 Legislative Session; HB 411 Fiscal Note, Maryland General Assembly (2026 Session); Md. Tax-Gen. Code Ann. § 10-218; Md. Tax-Gen. Code Ann. § 10-217

Maryland allows individuals to claim personal exemptions for themselves, their spouses, and their dependents when calculating Maryland taxable income. Maryland has not conformed to the federal suspension of personal exemptions under the Tax Cuts and Jobs Act of 2017; the state maintains its own personal exemption structure independent of federal law. Whether or not a taxpayer files a federal income tax return, Maryland permits the deduction of personal exemptions under Md. Tax-Gen. Code Ann. § 10-211.

Base personal exemption amounts

An individual other than a fiduciary may deduct $3,200 for each of the following: (1) the taxpayer; (2) the spouse of the taxpayer if a joint return is not filed and the spouse has no gross income for the calendar year and is not a dependent of another taxpayer; and (3) each individual who is a dependent of the taxpayer, as defined in Internal Revenue Code § 152, for the taxable year. The $3,200 exemption amount applies to all qualifying individuals regardless of age, with the exceptions noted below for dependents age 65 and older and for the taxpayer's own age and disability status.

Additional exemptions for age and blindness

Maryland allows four categories of additional personal exemptions beyond the base $3,200 amounts:

1. Dependent age 65 or older. An additional $3,200 for each dependent who is at least 65 years old on the last day of the taxable year. This additional exemption doubles the total exemption for a dependent age 65 or older from $3,200 to $6,400.

1. Taxpayer age 65 or older. An additional $1,000 if the taxpayer is at least 65 years old on the last day of the taxable year.

1. Blind taxpayer. An additional $1,000 if the taxpayer is a blind individual on the last day of the taxable year, as described in Md. Tax-Gen. Code Ann. § 10-208(c).

1. Spouse age 65 or older or blind. If filing a joint return, the additional $1,000 exemptions for age 65 or older and for blindness are also available for the spouse.

Unlike the federal income tax, which suspended personal exemptions for tax years 2018 through 2025 under the Tax Cuts and Jobs Act, Maryland did not adopt the federal suspension. Maryland taxpayers claim personal exemptions on their Maryland returns based solely on Maryland law, without regard to the federal treatment.

Phase-out for high-income taxpayers

The $3,200 base exemption amount and the $3,200 additional exemption for dependents age 65 or older are subject to phase-out for high-income taxpayers. Md. Tax-Gen. Code Ann. § 10-211(c) reduces or eliminates these exemptions based on federal adjusted gross income and filing status. The additional $1,000 exemptions for the taxpayer (or spouse) being age 65 or older or blind are not subject to phase-out.

For single filers and married individuals filing separately, the phase-out rules are:

• FAGI $100,000 or less: Full $3,200 exemption allowed.
• FAGI $100,001 to $125,000: Exemption reduced to $1,600.
• FAGI $125,001 to $150,000: Exemption reduced to $800.
• FAGI over $150,000: Exemption eliminated (reduced to $0).

For married couples filing jointly, heads of household, and surviving spouses, the phase-out rules are:

• FAGI $150,000 or less: Full $3,200 exemption allowed.
• FAGI $150,001 to $175,000: Exemption reduced to $1,600.
• FAGI $175,001 to $200,000: Exemption reduced to $800.
• FAGI over $200,000: Exemption eliminated (reduced to $0).

The phase-out applies to each exemption claimed under subsection (b)(1) (the base $3,200 exemption for taxpayer, spouse, and dependents) and subsection (b)(2) (the additional $3,200 exemption for dependents age 65 or older). For example, a married couple filing jointly with three dependents and FAGI of $180,000 would be entitled to five exemptions under subsection (b)(1)—taxpayer, spouse, and three dependents—but each exemption is reduced from $3,200 to $800, for a total exemption deduction of $4,000 (5 × $800). If one of the dependents is age 65 or older, that dependent generates an additional exemption under subsection (b)(2), also reduced to $800, bringing the total to $4,800.

Relationship to federal law and dependent qualification

Maryland defines "dependent" by reference to Internal Revenue Code § 152. To qualify as a dependent for Maryland personal exemption purposes, the individual must meet the federal definition of dependent, which includes qualifying children and qualifying relatives under IRC § 152. A taxpayer who is claimed as a dependent on another taxpayer's federal or Maryland return may not claim a personal exemption for himself or herself on the taxpayer's own Maryland return. This rule is implicit in the structure of § 10-211(a), which allows an exemption for "the taxpayer" only if the taxpayer is not a dependent of another.

Exemptions for withholding purposes

Maryland employers withhold state income tax based on the number of personal exemptions the employee claims on Maryland Form MW507 (Employee's Maryland Withholding Exemption Certificate). Md. Code Regs. 03.04.01.01(B)(4) provides that an employee may claim on the withholding exemption certificate those personal and dependent exemptions provided for under Md. Tax-Gen. Code Ann. § 10-211. The withholding exemption amount generally reflects the $3,200 statutory exemption, with reductions for high-income earners as described in the Personal Exemption Worksheet accompanying Form MW507. Employees with federal adjusted gross income expected to exceed $100,000 (single or married filing separately) or $150,000 (married filing jointly or head of household) must complete the Personal Exemption Worksheet to determine the reduced value of their withholding exemptions.

Source: Md. Tax-Gen. Code Ann. § 10-211; Md. Code Regs. 03.04.01.01