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Maryland Taxes: What You Need to Know

Federal, State, and Local Tax Withholding in Maryland in 2026

Federal Income Tax:

Maryland residents are subject to federal income tax, just like all other U.S. citizens. The federal tax is calculated based on a progressive tax system with varying rates depending on income brackets, meaning individuals pay higher rates on higher income only on the portion that exceeds each threshold. The One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, permanently extended the Tax Cuts and Jobs Act rate structure. For the 2026 tax year, the federal tax brackets are as follows:

For Single Filers: (Source)

• 10%: Applies to taxable income up to $12,400.
• 12%: Applies to income between $12,401 and $50,400.
• 22%: Applies to income between $50,401 and $105,700.
• 24%: Applies to income between $105,701 and $201,775.
• 32%: Applies to income between $201,776 and $256,200.
• 35%: Applies to income between $256,201 and $640,600.
• 37%: The top rate applies to taxable income over $640,600.

For Married Couples Filing Jointly: (Source)

• 10%: Applies to taxable income up to $24,800.
• 12%: Applies to income between $24,801 and $100,800.
• 22%: Applies to income between $100,801 and $211,400.
• 24%: Applies to income between $211,401 and $403,550.
• 32%: Applies to income between $403,551 and $512,450.
• 35%: Applies to income between $512,451 and $768,700.
• 37%: The top rate applies to taxable income over $768,700.

For Head of Household Filers: (Source)

• 10%: Applies to taxable income up to $17,700.
• 12%: Applies to income between $17,701 and $67,450.
• 22%: Applies to income between $67,451 and $105,700.
• 24%: Applies to income between $105,701 and $201,750.
• 32%: Applies to income between $201,751 and $256,200.
• 35%: Applies to income between $256,201 and $640,600.
• 37%: The top rate applies to taxable income over $640,600.

For Married Filing Separately: (Source)

• 10%: Applies to taxable income up to $12,400.
• 12%: Applies to income between $12,401 and $50,400.
• 22%: Applies to income between $50,401 and $105,700.
• 24%: Applies to income between $105,701 and $201,775.
• 32%: Applies to income between $201,776 and $256,200.
• 35%: Applies to income between $256,201 and $384,350.
• 37%: The top rate applies to taxable income over $384,350.

The 2026 federal standard deduction increases to $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household. The standard deduction reduces the amount of income on which tax is calculated, meaning most employees won’t pay federal income tax on their first $16,100 (single) or $32,200 (joint) of earnings. (Source)

Maryland State Income Tax:

Maryland imposes its own progressive state income tax using a graduated rate structure. The 2025 legislative session (Budget Reconciliation and Financing Act of 2025) made significant changes effective for tax years beginning after December 31, 2024 — retaining existing brackets up to 5.75% while adding two new top brackets of 6.25% and 6.50% for high earners. (Source)

For Single Filers, Married Filing Separately, and Dependent Taxpayers: (Source)

1. 2.00%: Applies to taxable income $1 – $1,000.
2. 3.00%: Applies to taxable income $1,001 – $2,000.
3. 4.00%: Applies to taxable income $2,001 – $3,000.
4. 4.75%: Applies to taxable income $3,001 – $100,000.
5. 5.00%: Applies to taxable income $100,001 – $125,000.
6. 5.25%: Applies to taxable income $125,001 – $150,000.
7. 5.50%: Applies to taxable income $150,001 – $250,000.
8. 5.75%: Applies to taxable income $250,001 – $500,000.
9. 6.25%: Applies to taxable income $500,001 – $1,000,000 ⭐ New for 2025+.
10. 6.50%: Applies to taxable income over $1,000,000 ⭐ New for 2025+.

For Married Couples Filing Jointly, Head of Household, and Qualifying Surviving Spouses: (Source)

1. 2.00%: Applies to taxable income $1 – $1,000.
2. 3.00%: Applies to taxable income $1,001 – $2,000.
3. 4.00%: Applies to taxable income $2,001 – $3,000.
4. 4.75%: Applies to taxable income $3,001 – $150,000.
5. 5.00%: Applies to taxable income $150,001 – $175,000.
6. 5.25%: Applies to taxable income $175,001 – $225,000.
7. 5.50%: Applies to taxable income $225,001 – $300,000.
8. 5.75%: Applies to taxable income $300,001 – $600,000.
9. 6.25%: Applies to taxable income $600,001 – $1,200,000 ⭐ New for 2025+.
10. 6.50%: Applies to taxable income over $1,200,000 ⭐ New for 2025+.

Maryland’s progressive system ensures that individuals with higher earnings pay a larger share of their income in taxes. The two new top brackets — 6.25% and 6.50% — were introduced in the 2025 legislative session and are fully in effect for 2026 withholding.

The 2026 Maryland standard deduction is $3,350 for single filers and $6,700 for married couples filing jointly, head of household, and qualifying surviving spouses. The personal exemption is $3,200 per taxpayer, though this phases out for single filers with federal AGI above $100,000 and joint filers above $150,000. (Source) (Source)

Maryland also allows certain deductions and credits, such as the Earned Income Tax Credit (EITC), the Child and Dependent Care Credit, and a Student Loan Debt Relief Credit of up to $5,000, which can significantly reduce tax liability for eligible residents. All new employees must complete Form MW507 (Employee’s Maryland Withholding Exemption Certificate) before their first paycheck. Employers must default to the highest local rate of 3.30% for employees who do not submit a form. (Source)

Additionally, Maryland imposes a 2% capital gains surtax on net capital gains for individuals with federal adjusted gross income above $350,000, for tax years beginning after December 31, 2024. (Source)

Local Taxes in Maryland:

Maryland is one of the few states where every resident pays a local income tax — collected on the same state return as a convenience to local governments. Your local rate is based on where you live on December 31 — not where you work. Local rates for 2026 range from 2.25% to 3.30% across Maryland’s 23 counties and Baltimore City. (Source)

• Most counties: 3.20% — including Baltimore City, Baltimore County, Montgomery County, Prince George’s County, Howard County, and many others.
• Highest rate: 3.30% — Dorchester County and Kent County (Kent raised from 3.20% for 2026).
• Lowest rate: 2.25% — Worcester County.
• Notable changes for 2026: Allegany County increased from 3.03% to 3.20%, and Kent County increased from 3.20% to 3.30%.
• Graduated local rates apply in Anne Arundel County (2.70%–3.20%) and Frederick County (2.25%–3.20%) depending on income level and filing status.
• Nonresidents who work in Maryland but live elsewhere pay a flat combined rate of 7.0%, which includes the state income tax and a Special 2.25% Nonresident rate in place of any local tax.

These local taxes play a crucial role in funding public schools, infrastructure, and emergency services at the county level. The combined state and local tax burden means Maryland residents in high-rate counties can face combined marginal rates ranging from 7.00% to 9.80%, depending on income level and county of residence. (Source)

• Sales Taxes: Maryland imposes a statewide sales tax of 6% on most retail goods and services, with no additional local sales tax. Alcohol sold in licensed establishments is taxed at 9%. Essential items such as groceries and prescription drugs are exempt. Effective July 1, 2025, a new 3% tech tax applies to data and information technology services. The vehicle excise tax (titling tax on vehicle purchases) increased to 6.5% from 6%. Short-term passenger car and recreational vehicle rentals are subject to an 11.5% sales tax, and the FY2026 budget bill added a further 3.5% excise tax on car rentals on top of this. (Source) (Source)

FICA and State Insurance Taxes in Maryland in 2026

FICA Taxes include Social Security and Medicare:

• Social Security is taxed at 6.2% on income up to $184,500 in 2026. This wage base increased from $168,600 in 2024 — employers must update payroll systems accordingly. (Source)
• Medicare is taxed at 1.45% on all income, with an additional 0.9% surtax on earnings over $200,000 for single filers ($250,000 for married filing jointly). (Source)

Maryland Unemployment Insurance (UI): Maryland UI is employer-funded only — employees pay nothing. For 2026, Tax Table A is in effect (same as 2025 — the lowest rate table), with contributory employer rates ranging from 0.30% to 7.50%. The standard rate for employers who fail to file is 7.50%. New employer rates range from 1.0% to 2.6% depending on industry. UI tax applies to the first $8,500 of each employee’s wages per calendar year. Employers receive their individual Experience Rate Notice each January via the BEACON portal. (Source) (Source)

Maryland FAMLI (Paid Family and Medical Leave): Maryland’s FAMLI program has been delayed — no payroll deductions are required in 2026. The Maryland General Assembly passed legislation (HB 102) pushing contributions to January 1, 2027, with benefits beginning no later than January 3, 2028. The 2027 contribution rate will be announced by the Labor Secretary no later than May 1, 2026. The previously announced rate of 0.90% (split equally between employer and employee for employers with 15+ employees) may be updated. Employers with fewer than 15 employees are not required to pay the employer share. (Source) (Source)

Maryland Sick and Safe Leave: While FAMLI is delayed, employers must already comply with the Maryland Healthy Working Families Act. Employers with 15 or more employees must provide paid sick and safe leave; those with fewer than 15 must provide unpaid leave. Leave accrues at 1 hour for every 30 hours worked. (Source)

Pre-Tax Deductions in Maryland in 2026

Pre-tax deductions play a crucial role in reducing your taxable income, thereby lowering your overall tax liability. These deductions are taken from your gross income before any taxes are applied, which ultimately reduces the amount of income subject to taxation. Here’s a detailed breakdown of common pre-tax deductions that Maryland residents can utilize:

Health Insurance Premiums

Employee contributions toward medical, dental, and vision insurance are generally deducted from wages on a pre-tax basis. This means that the amounts contributed for these health insurance plans are not included in taxable income, effectively reducing the employee’s federal, state, and FICA tax liability. This can translate into significant tax savings, especially for employees with comprehensive coverage.

401(k) Contributions

Contributions to 401(k) retirement accounts are pre-tax, reducing your taxable income. For 2026, the contribution limit is $24,500, up from $23,500 in 2025. Employees aged 50 and older may contribute an additional $8,000 catch-up contribution, and a higher catch-up limit of $11,250 applies to those aged 60–63 under SECURE 2.0 provisions. The IRA contribution limit also increased to $7,500 for 2026. (Source)

Health Savings Accounts (HSA) and Flexible Spending Accounts (FSA)

• Health Savings Accounts (HSAs) are available to individuals enrolled in high-deductible health plans (HDHPs). Contributions to an HSA are pre-tax and can be used to pay for qualified medical expenses. For 2026, the HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage. HSAs have the added benefit of allowing funds to roll over year to year. (Source)
• Flexible Spending Accounts (FSAs) allow employees to contribute pre-tax dollars for medical and dependent care expenses. The FSA contribution limit for 2026 is $3,400, up $100 from 2025. The maximum carryover amount is $680. Unlike HSAs, FSAs generally have stricter rules regarding fund rollover, making it crucial to plan annual expenses carefully. (Source)

Tax Rate Summary Table

These pre-tax deductions and corresponding tax rates provide significant opportunities for Maryland residents to manage their tax liabilities effectively while planning — whether it involves health, retirement savings, or commuting costs. Understanding these deductions can help individuals maximize their take-home pay and benefit from tax-advantaged savings strategies.

Median Household Income in Maryland (2026)

Maryland consistently ranks among the highest states for household income, driven by its proximity to Washington, D.C. and a strong presence of federal government employment, healthcare, and technology sectors. According to the U.S. Census Bureau’s 2023 American Community Survey, Maryland’s median household income was $98,678, ranking among the top three states nationally.

(Source) (Source)

Income disparities exist between jurisdictions, with Montgomery County, Howard County, and counties in the Washington D.C. suburbs generally enjoying higher incomes compared to rural areas on the Eastern Shore.

Maryland Tax Brackets 2026

Maryland uses a progressive income tax structure to ensure that taxpayers contribute based on their income level, helping to balance the financial load across different income groups. This means that higher earners pay a higher tax rate, while lower earners benefit from lower rates. Maryland’s system is distinctive because residents pay both state tax and a local (county/city) tax on the same return, making their effective rate among the most layered in the nation.

For the 2026 tax year, Maryland’s state income tax rates are divided into ten brackets — the same structure in place since the 2025 legislative session added two new top brackets for high earners. (Source)

For Single Filers:

1. 2.00%: Applies to taxable income up to $1,000.
2. 3.00%: Applies to taxable income between $1,001 and $2,000.
3. 4.00%: Applies to taxable income between $2,001 and $3,000.
4. 4.75%: Applies to the broad middle range — $3,001 to $100,000. This is the rate most Maryland single filers pay on the bulk of their income.
5. 5.00%: Applies to income between $100,001 and $125,000.
6. 5.25%: Applies to income between $125,001 and $150,000.
7. 5.50%: Applies to income between $150,001 and $250,000.
8. 5.75%: Applies to income between $250,001 and $500,000.
9. 6.25%: Applies to income between $500,001 and $1,000,000 — new bracket effective 2025.
10. 6.50%: Applies to income over $1,000,000 — new bracket effective 2025.

For Married Couples Filing Jointly:

The brackets for joint filers are wider at the lower rates, allowing couples to earn more before reaching higher brackets:

1. 2.00%: Applies to taxable income up to $1,000.
2. 3.00%: Applies to taxable income between $1,001 and $2,000.
3. 4.00%: Applies to taxable income between $2,001 and $3,000.
4. 4.75%: Applies to the broad middle range — $3,001 to $150,000.
5. 5.00%: Applies to income between $150,001 and $175,000.
6. 5.25%: Applies to income between $175,001 and $225,000.
7. 5.50%: Applies to income between $225,001 and $300,000.
8. 5.75%: Applies to income between $300,001 and $600,000.
9. 6.25%: Applies to income between $600,001 and $1,200,000 — new bracket effective 2025.
10. 6.50%: Applies to income over $1,200,000 — new bracket effective 2025.

Notes on Maryland’s tax system:

• Maryland law does not permit using a rate of less than 4.75% for withholding tax purposes on the bulk of wages.
• Employees who do not submit a Form MW507 are defaulted to the highest local rate of 3.30% by their employer.
• The combined state and local marginal tax rate on wages ranges from 7.00% (4.75% state + 2.25% Worcester County, on income in the 4.75% bracket) to 9.80% (6.50% state + 3.30% Dorchester/Kent County, on income over $1M/$1.2M), making Maryland one of the higher combined-rate states for working residents.
• The information provided here is based on the Maryland Comptroller’s 2026 State and Local Income Tax Withholding Information memo and the Maryland Tax Alert from the 2025 legislative session.

(Source) (Source)