Maryland's income tax system has two distinct layers that catch many newcomers off guard. The state tax — running from 2% to 6.50% across ten brackets, after new top brackets took effect for the 2025 tax year — is only part of the picture. Every Maryland county (and Baltimore City) levies its own local income tax on top, ranging from 2.25% in Worcester County to 3.3% in Dorchester and Kent counties (3.2% in Montgomery County, Prince George's County, Howard County, and Baltimore City).
The result: a Maryland resident in Montgomery County earning $100,000 faces a combined effective income tax rate of around 7.37% — higher than a New York State resident (outside NYC) at the same income, and significantly higher than neighbouring Virginia, which has no county income tax. Understanding both layers is essential for anyone considering a move to the DC metro area, where Maryland and Virginia compete as bedroom communities for federal workers and private-sector employees.
Maryland uses ten progressive income tax brackets (after new top brackets took effect for the 2025 tax year, filed in 2026, under Maryland's Budget Reconciliation and Financing Act). These rates apply to Maryland taxable income — your federal adjusted gross income after the Maryland standard deduction and personal exemption are subtracted.
| Taxable Income (Single) | Rate |
|---|---|
| $0 – $1,000 | 2% |
| $1,000 – $2,000 | 3% |
| $2,000 – $3,000 | 4% |
| $3,000 – $100,000 | 4.75% |
| $100,000 – $125,000 | 5% |
| $125,000 – $150,000 | 5.25% |
| $150,000 – $250,000 | 5.5% |
| $250,000 – $500,000 | 5.75% |
| $500,000 – $1,000,000 | 6.25% |
| Above $1,000,000 | 6.50% |
Maryland replaced its old 15%-of-income standard deduction formula with a flat dollar amount starting with the 2025 tax year:
Unlike the old formula, the new flat deduction does not vary with income — every filer in a given status claims the same amount.
The personal exemption is $3,200 per exemption. It steps down (not dollar-for-dollar) once federal AGI exceeds $100,000 for single/MFS filers or $150,000 for joint/head-of-household/qualifying-surviving-spouse filers: the exemption drops to $1,600 in the next $25,000 band, then $800, then $0 (fully eliminated above $150,000 for single/MFS, above $200,000 for joint/HOH/QSS). Combined, a single filer with income at or below $100,000 starts with $6,600 in total deductions in 2026 (standard deduction $3,400 + personal exemption $3,200), before any exemption phase-out applies.
Every Maryland county and Baltimore City levies a local income tax on top of the state rate. This is not optional — it is automatically calculated and collected by the state alongside the state income tax when you file your Maryland return. The local tax applies to the same Maryland taxable income base as the state tax.
| County / City | Local Income Tax Rate | Combined Top Rate (State 6.5% + Local) |
|---|---|---|
| Montgomery County | 3.2% | 9.7% |
| Prince George's County | 3.2% | 9.7% |
| Baltimore City | 3.2% | 9.7% |
| Howard County | 3.2% | 9.7% |
| Baltimore County | 3.2% | 9.7% |
| Anne Arundel County (top bracket; 2.7% and 2.94% on lower incomes) | 3.2% | 9.7% |
| Frederick County (top bracket; 2.25%–2.96% on lower incomes) | 3.2% | 9.7% |
| Carroll County | 3.03% | 9.53% |
| Harford County | 3.06% | 9.56% |
| Washington County | 2.95% | 9.45% |
| Allegany County | 3.2% | 9.7% |
| Garrett County | 2.65% | 9.15% |
| Dorchester and Kent counties | 3.3% | 9.8% |
| Worcester County | 2.25% | 8.75% |
The combined statutory top rate (state 6.5% + Montgomery County 3.2%) reaches 9.7% — this applies to Maryland taxable income above $1,000,000 (single; $1,200,000 joint). At middle incomes where most taxpayers sit, the state bracket is 4.75%, and the combined rate with a 3.2% county tax is 7.95%. This is the rate most DC-area workers in Maryland encounter across the bulk of their working income.
Why does Maryland have county income taxes? Maryland counties rely heavily on the income tax share (called the 'piggyback' tax, a holdover from earlier state-local fiscal arrangements) to fund local schools, public safety, and services. Unlike in Virginia — where localities rely primarily on property taxes — Maryland distributes income tax collections to counties, making the local income tax a fundamental part of the state's fiscal architecture rather than an optional add-on.
These examples use a single filer with the flat 2026 standard deduction ($3,400) and personal exemption ($3,200, where not yet phased out). The personal exemption phase-out above $100,000 (single/MFS) is noted where relevant. County tax examples use Montgomery County at 3.2%.
At $150,000, a single filer's personal exemption has stepped down to $800 (the $125,000–$150,000 band), giving taxable income of $145,800 ($150,000 − $3,400 standard deduction − $800 exemption).
At $250,000, a single filer's personal exemption is fully phased out (eliminated above $150,000). Taxable income: $246,600 ($250,000 − $3,400 standard deduction).
These figures are estimates based on the standard deduction and single-filer personal exemption. Actual tax will vary based on itemised deductions, credits, filing status, and the specific phase-out calculation for the personal exemption. Always verify with a tax professional or the Maryland Comptroller's official tax tables.
The Washington DC metro area is split across three tax jurisdictions — Maryland, Virginia, and the District of Columbia — and the choice of where to live has significant income tax consequences for the hundreds of thousands of federal government employees and private-sector workers who commute to DC. DC does not tax the wages of non-residents who work there (federal law prohibits a DC commuter tax); you pay income tax to the state where you live, and residents who work within their home state face their state's full rate.
For DC-area residents who work in Maryland or Virginia (not DC itself), the comparison is direct:
| Scenario ($100K income, single) | Combined Income Tax | Effective Rate |
|---|---|---|
| Maryland (Montgomery County) | ~$7,373 | ~7.37% |
| Virginia (no local income tax) | ~$4,936 | ~4.94% |
| DC (resident, top bracket 10.75%) | ~$5,625 | ~5.63% |
A federal employee earning $100,000 who lives in Fairfax County, Virginia pays roughly $2,440 less in income tax annually than an equivalent employee living in Montgomery County, Maryland — purely from the residential location decision. Over a 30-year career, that difference compounds significantly.
This dynamic partly explains why Northern Virginia (Fairfax, Arlington, Alexandria) has attracted large numbers of federal workers and tech employees, while Maryland counters with arguments around schools, proximity to DC agencies, and the availability of MARC commuter rail to downtown DC.
Important rule for DC workers: Residents of Maryland who commute to DC for work pay Maryland state and county income tax on those wages. DC does not tax non-residents' wages, so Maryland residents do not owe DC income tax on DC wages. The county income tax burden described above therefore applies to Marylanders whether they work in Maryland or in DC.
Maryland's treatment of retirement income is more complicated than neighbouring Pennsylvania (which exempts most retirement income) and less generous than some Sun Belt states, but does offer targeted relief:
Maryland does not tax Social Security benefits. Regardless of income level, Social Security retirement and disability benefits are fully exempt from Maryland income tax. This aligns Maryland with the large majority of states, which do not tax Social Security.
Maryland allows a subtraction of up to $20,000 of military retirement income for taxpayers aged 55 or older ($12,500 if under 55), per the 2025 Maryland resident booklet. Military retirement pay above those limits is taxable by Maryland, subject to the pension exclusion and other rules.
Maryland offers a pension exclusion for income from qualified employee retirement systems, but it is not universal. Retirees aged 65 and over (or those who are totally and permanently disabled) may exclude up to $41,200 (tax year 2025) of pension income from a qualified retirement plan from Maryland income tax, reduced by any Social Security and railroad retirement benefits received. For those under 65 who retired from a qualifying public safety job (law enforcement, fire service, corrections), a separate exclusion may apply.
Income from 401(k) and 403(b) plans and employer pensions can qualify for the same pension exclusion at 65+, but traditional, Roth and rollover IRA withdrawals do not qualify and are generally subject to Maryland income tax after the standard deduction and personal exemption. This contrasts with Pennsylvania, which fully exempts 401(k) and IRA distributions for those over 59½, making Pennsylvania notably more retirement-friendly for private-sector workers.
A Maryland retiree with $80,000 in income (made up of $30,000 Social Security + $50,000 from a 401(k) or private pension) would owe Maryland income tax on the retirement income after the standard deduction, personal exemption, and any pension exclusion that applies (the exclusion is reduced by Social Security received), plus the applicable county income tax. A Pennsylvania retiree in the same situation would owe approximately $0 in state income tax on the same income profile.
Maryland occupies a distinctive position in the Mid-Atlantic income tax landscape — its state rates are comparable to neighbours, but the mandatory county income tax pushes combined burdens well above what residents of Virginia or Pennsylvania face at equivalent incomes.
| State | Top State Rate | Local Income Tax | Combined Top Rate | At $100K (Single, Effective) |
|---|---|---|---|---|
| Maryland | 6.50% | 2.25%–3.3% | Up to 9.80% | ~7.37% (Montgomery Co.) |
| Virginia | 5.75% | None | 5.75% | ~4.94% |
| DC | 10.75% | N/A (DC is one jurisdiction) | 10.75% | ~5.63% |
| Pennsylvania | 3.07% flat | Local earned income tax (Philadelphia 3.735% for residents from July 2026) | Varies by municipality | 3.07% state plus local tax |
| New York State | 10.9% | NYC: 3.078%–3.876% (state-only elsewhere) | Up to 14.8% (NYC) | ~4.9% (outside NYC, state tax only) |
| Delaware | 6.6% | Wilmington: 1.25% city wage tax | 7.85% (Wilmington) | ~5.4% statewide |
The Virginia advantage: Virginia's top rate of 5.75% is now lower than Maryland's state top rate of 6.50% (effective for the 2025 tax year), and Virginia levies no local income tax. A Virginia resident earning $250,000 pays only state income tax at 5.75%. A Maryland resident at the same income in Montgomery County pays state tax plus 3.2% county tax — a combined statutory top rate up to 9.70% on income above $1,000,000, more in annual income tax than their Virginia counterpart at that income level.
The Pennsylvania comparison: Pennsylvania's flat 3.07% rate is the lowest state income tax rate among the major Mid-Atlantic states. However, Pennsylvania municipalities levy earned income taxes (Philadelphia: 3.735% for residents from July 2026), which narrow the gap. Pennsylvania's retirement income exemptions (401(k), IRA, pension distributions over 59½ are fully exempt) make it considerably more attractive than Maryland for retirees with substantial retirement savings.
When Maryland wins: For high earners in specific industries, Maryland's overall tax and living cost picture can be competitive. Howard County and Montgomery County offer some of the best public school systems in the country, a factor many families weigh alongside the tax cost. The DC proximity premium — being within MARC or Metro commuting distance of the largest employer (the federal government) in the region — supports housing values and employment stability that offset the higher income tax burden for many residents.
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