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Baltimore Maryland Tax Guide 2026: MD Progressive Tax, 3.2% City Piggyback & Estate Planning

Daniel · CountryTaxCalc Updated April 2026
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KEY INSIGHT
Baltimore City residents face a combined top income tax rate of 9.7%: Maryland's 6.5% top state rate (on income over $1 million) plus Baltimore City's 3.2% local piggyback — a rate shared with Baltimore County, Montgomery County, Prince George's County and many other Maryland counties. Maryland also levies estate tax on estates over $5M (well below the federal $15M (2026, OBBBA) threshold) and inheritance tax on non-immediate family beneficiaries.
At a glance

Key Facts

Maryland State Income Tax Rates 2026
Progressive: 2% on $0-$1K; 3% on $1K-$2K; 4% on $2K-$3K; 4.75% on $3K-$100K; 5% on $100K-$125K; 5.25% on $125K-$150K; 5.5% on $150K-$250K; 5.75% on $250K-$500K; 6.25% on $500K-$1M; 6.5% over $1M (single filers). Standard deduction: $3,350 single for 2025, indexed upward for 2026. Personal exemption: $3,200, reduced above $100,000 federal AGI and eliminated above $150,000 for single filers.
Baltimore City 3.2% Piggyback — Among the Highest Local Rates in US
Maryland allows counties and Baltimore City to levy piggyback income taxes. Baltimore City rate: 3.2% — the same as Baltimore County, Montgomery County and Prince George's County (county rates run from 2.25% to 3.3%). Combined top rate: 6.5% + 3.2% = 9.7%. Baltimore County (the suburbs): also 3.2%, for the same 9.7% combined top rate. The piggyback is based on Maryland taxable income and applies to residents — not based on where you work.
Baltimore City vs Baltimore County: Tax and Property Differences
These are completely separate jurisdictions. Baltimore City (independent city): income top 9.7%; property tax ~$2.248 per $100 assessed value. Baltimore County (Towson, Catonsville, etc.): income top 9.7%; property tax ~$1.10 per $100 assessed value. A $400,000 home: city property tax ~$8,992/year vs county ~$4,400/year — a $4,592 annual difference. This drives significant migration from city to suburbs.
Maryland Estate and Inheritance Tax
Maryland uniquely has BOTH estate tax AND inheritance tax. Estate tax: 16% on estates over $5M (much lower threshold than federal $15M in 2026, OBBBA). Inheritance tax: 10% for beneficiaries who are not exempt (such as nieces, nephews, and friends). Exempt beneficiaries include spouses, children, grandchildren, parents, grandparents, and siblings; a domestic partner is exempt only on a jointly held primary residence. Planning with AB trusts or QTIP trusts is essential for Maryland couples with estates above $5M.
Maryland Retirement Income Tax
Pension exclusion for residents 65+ or totally disabled: up to $41,200 for tax year 2025 (the 2026 figure is not yet published), reduced by Social Security and railroad retirement benefits received. Military retirement income: up to $20,000 can be subtracted at age 55+ ($12,500 under 55). Social Security: exempt from Maryland income tax at every income level. These exclusions reduce the Maryland and Baltimore City piggyback burden for retirees.
Introduction

Baltimore City levies a local income tax of 3.2% — among the highest in the United States — on top of Maryland's progressive state rates reaching 6.5%. For a high-income Baltimore City resident, the combined state-local top rate is 9.7%, yet Baltimore housing costs a fraction of comparable coastal cities. Maryland's estate tax (triggering at $5M rather than the federal $15M (2026, OBBBA)) creates significant planning needs for homeowners and business owners in the Baltimore metro area. Understanding the distinction between Baltimore City and Baltimore County — two completely separate jurisdictions with different property tax rates — is essential for anyone considering relocation within the metro.

Section 01

Is It Worth Living in Baltimore City vs Suburbs for Tax Purposes?

For a household earning $200,000: Baltimore City pays approximately $9,800 in Maryland state tax + $6,290 city piggyback + $8,992 property tax on a $400K home = ~$25,100/year. Baltimore County pays approximately $9,800 state + $6,290 county piggyback + $4,400 property tax = ~$20,500/year. Annual saving in suburbs: ~$4,600, all from the lower property tax rate (the 2026 local income tax rate is 3.2% in both).

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FAQ

Frequently Asked Questions

If I live in Baltimore County but work in Baltimore City, do I pay city tax?

No. Maryland's local piggyback tax is based on where you LIVE, not where you work. A Baltimore County resident commuting to Baltimore City pays Baltimore County's 3.2% rate (the same as the city's 3.2%), based on where you live. Your employer should withhold your home county rate. This is different from NYC or Pittsburgh which tax non-residents on work income.

How does Maryland's estate tax affect Baltimore-area estate planning?

Maryland's $5M estate tax threshold is far below the federal $15M (2026, OBBBA) exemption. A Maryland couple with a $10M estate owes no federal estate tax but owes significant Maryland estate tax without proper trust planning. AB trusts, QTIP trusts, and annual gifting strategies are commonly used by Maryland estate attorneys to fully use both spouses' $5M Maryland exemptions. This is a priority planning issue for homeowners in expensive Baltimore neighbourhoods whose estates may have crossed $5M through home appreciation and retirement savings.

Does Maryland tax Social Security income?

Maryland does not tax Social Security benefits: federally taxed Social Security and railroad retirement benefits are subtracted from Maryland income at every income level. Social Security received does reduce the Maryland pension exclusion.

How does the Maryland pension exclusion work?

Maryland allows a pension exclusion of up to $41,200 (tax year 2025) for residents 65+ or totally disabled, reduced by any Social Security and railroad retirement benefits received. This applies to qualifying 401(k), IRA, and employer pension distributions. The exclusion reduces Maryland taxable income AND the Baltimore City piggyback base, effectively reducing local tax as well. Military retirement income can be subtracted up to $20,000 (age 55+) or $12,500 (under 55).

Does Baltimore City have any additional sales tax?

No. Maryland's sales tax is 6% statewide — no county or city additions are permitted. Baltimore City charges exactly 6%, same as every other Maryland jurisdiction. This is a notable advantage: unlike Chicago (10.25%) or Denver (8.81%), Baltimore's 6% rate is flat and simple statewide.

What are the Baltimore City property tax relief programmes?

Baltimore City offers: the Homestead Tax Credit (caps annual assessment increases at 4% for owner-occupants); the Homeowners' Property Tax Credit (income-based relief for residents paying property taxes exceeding a set percentage of income — a Maryland state programme); senior citizen tax credits for residents 65+ with limited income. Applications are filed with the Maryland State Department of Assessments and Taxation.
Disclaimer:This guide provides general tax information for educational purposes only. Maryland estate and inheritance tax planning is highly fact-specific. Consult a Maryland-licensed CPA or estate attorney.
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