Maryland State Taxes: What You’ll Pay in the 2026 Tax Season

Maryland has a graduated state individual income tax, with rates ranging from 2 percent to 6.5 percent. There are also jurisdictions that collect local income taxes. The state is the only one in the country to have both an inheritance and an estate tax. The Tax Foundation has consistently ranked the state toward the bottom of its competitiveness index.

The big picture:

• Income tax: State income tax ranges by income between 2 percent and 6.5 percent. All local municipalities also charge wage taxes, and a list of local rates can be found here.
• Property tax: The statewide average property tax rate was 0.92 percent of a home’s assessed value, though rates vary by county, according to the latest data from the Tax Foundation.
• Sales tax: A 6 percent tax rate applies to most goods and services. However, vehicle rentals (11.5 percent) and alcoholic beverages (9 percent) are taxed at different rates. The state has no local sales taxes.

How is income taxed?

What about investment income?

Maryland imposes a 2 percent surtax on net capital gains included in Maryland adjusted gross income if federal adjusted gross income exceeds $350,000. Some exclusions apply, which can be found here.

Are Social Security benefits taxed?

Social Security benefits are not taxed in Maryland.

How is property taxed?

Maryland had a statewide average property tax rate of 0.92 percent of a home’s assessed value, although rates vary by county and city. The lowest rate is 0.56 percent in Talbot County, while the highest rate is 1.37 percent in Baltimore City. The lowest median property taxes paid was $1,591 in Somerset County, while the highest median property taxes paid was $6,987 in Howard County.

What about sales and other taxes?

• Sales tax: A 6 percent tax rate applies to most goods and services. However, vehicle rentals (11.5 percent) and the sale of alcoholic beverages (9 percent) are taxed at different rates. Local governments can’t impose their own sales taxes in Maryland. Exemptions: There are several exemptions to the sales tax, including most grocery items, prescription medications, newspapers and infant car seats. For a complete list, visit here.
• Gas and diesel: Gasoline is taxed at 46 cents per gallon, while diesel is taxed at 46.75 cents per gallon.
• Vehicle tax: Maryland taxes 6.5 percent on auto purchases based on the vehicle’s book value or 6.5 percent of the purchase price on the notarized “Bill of Sale” for vehicles 7 years old or newer. For older vehicles, the tax is calculated on the purchase price.
• Alcohol: Alcoholic beverages are taxed at 9 percent. This is instead of the 6 percent sales tax.
• Lottery: For prizes of more than $5,000, the Maryland Lottery is required by law to withhold 24 percent federal tax, 9.5 percent state tax if you are a Maryland resident, or 8.75 percent state tax if you are not a Maryland resident. For prizes of more than $600 up to $5,000, taxes are not withheld when you receive your winnings, although these prizes are taxable and must be reported when winners file their tax returns.

Will my heirs or estate have to pay inheritance and estate tax?

• Inheritance Tax: In the state, collateral inheritance tax at the rate of 10 percent applies to property of the decedent that passes to anyone other than a grandparent; parent; spouse or domestic partner; child or lineal descendent of the child; sibling; or people with other specific relationships, which can be found here.
• Estate Tax: The state also has a maximum 16 percent estate tax that only applies to estates worth $5 million or more. In some cases, it can be less than 16 percent, depending on a complex calculation. More details are available here and here.

Are there any tax breaks for older residents?

• Senior tax credit: Residents who are 65 or older on the last day of the tax year may be eligible for a tax credit. If a taxpayer’s federal adjusted gross income does not exceed $100,000 (if filing single), the amount of the tax credit is equal to $1,000. For those married and filing jointly, qualifying surviving spouses, and head of household taxpayers whose federal adjusted gross income does not exceed $150,000, the credit amount is $1,750. The credit is reduced to $1,000 if only one spouse filing jointly is at least age 65. Part-year residents are not required to prorate the credit amount.
• Pension exclusion: The state provides a pension exclusion of up to $41,200 for the 2025 tax year to residents 65 and older. It has no income limitations for eligibility. Residents must meet the age requirement or be totally disabled, or the taxpayer’s spouse was totally disabled on the last day of the tax year. In addition, the taxpayer must include on their federal return any taxable income received as a pension, annuity or endowment from an employee retirement system.

Are military pensions taxed?

The state does tax military retirement pensions, but retired service members under age 55 can subtract up to $12,500 of their military retired pay from their gross income before determining their Maryland tax. At age 55, this subtraction increases to $20,000. The subtraction is available to retired service members who are receiving military retired pay from an active or reserve component of the U.S. armed forces.

What is the deadline for filing taxes in 2026?

State and federal income tax filings for the 2025 tax year are due April 15, 2026.

 

More AARP Financial Resources

• AARP Retirement Calculator Determine if you are saving enough to retire when — and how — you want.
• AARP’s Social Security Calculator Figure out when to claim and how to maximize your Social Security benefits.
• AARP Tax Tools Explore resources to help you calculate and prepare taxes.