Last Updated: April 2026
Maryland is unique among US states in that every county — plus Baltimore City — levies its own income tax on top of the state rate. This county income tax is not optional: if you live in Maryland, you pay both the state rate (up to 5.75%) and your county’s rate (typically 2.4–3.2%), for a combined burden that can reach 9.45% for high earners in Baltimore City. This structure, combined with the state’s position as the wealthiest state by median household income (~$94,000, driven by the DC suburb federal workforce), makes Maryland one of the highest-taxed states in the country on a combined basis.
This guide covers Maryland’s two-tier income tax system (state + county), the Millionaire Surtax, the estate tax and its $5M threshold, property taxes across different counties, the flat 6% sales tax, and the specific tax considerations for the large federal employee and contractor workforce living in Montgomery County, Prince George’s County, and the DC suburbs.
Maryland’s income tax structure is unique: every Maryland resident pays both a state income tax and a county income tax. Unlike local income taxes in other states that are levied on employers or apply only in certain cities, Maryland’s county tax is statewide and mandatory for all residents. The state rate is progressive (2–5.75%), while county rates are set by each jurisdiction:
The county tax is collected and remitted to the state along with the state income tax — Maryland residents file one combined state/county return with the Comptroller of Maryland.
Maryland imposes an additional 0.5% surtax on income above $1 million, on top of the state and county rates. For a Baltimore City or Montgomery County resident with income above $1 million, the combined rate is: 5.75% state + 3.2% county + 0.5% surtax = 9.45% combined. This places Maryland at the top tier of high-income tax states, comparable to the effective rates in New Jersey and California for very high earners.
| Annual Income | Maryland Combined (state + 3.2% county) | Virginia (5.75% effective) | DC (~8.9% top rate) |
|---|---|---|---|
| $75,000 | ~$6,300 | ~$3,800 | ~$5,100 |
| $200,000 | ~$17,600 | ~$10,900 | ~$14,400 |
| $400,000 | ~$35,700 | ~$22,400 | ~$33,200 |
| $1,500,000 | ~$142,200 | ~$85,200 | ~$132,000 |
Approximate estimates after standard deductions. Actual amounts vary by filing status and deductions.
Maryland is one of fewer than 20 states that still impose a state-level estate tax. The key features:
For long-time Maryland homeowners in high-value areas like Potomac, Chevy Chase, Bethesda, or the Eastern Shore, a $5M estate is not exceptional given accumulated home equity, investment portfolios, and business interests. Maryland estate tax planning with trusts is essentially standard advice for Maryland residents in their 50s and above with meaningful assets.
In addition to the estate tax, Maryland levies an inheritance tax — one of the few states with both. The inheritance tax rate is 10% of the clear value of property received by collateral heirs (siblings, cousins, nieces and nephews, unrelated individuals). Exempt from inheritance tax: transfers to a surviving spouse, children, grandchildren, parents, grandparents, siblings (if they also have a close family connection). In practice, most family-to-family transfers avoid inheritance tax, but it can affect unmarried partners, non-biological relatives, and others.
Maryland levies both a state property tax (0.112% of assessed value) and county/city rates, resulting in a combined effective rate averaging approximately 1.09% statewide. The assessed value is the State Department of Assessments and Taxation (SDAT) assessed value, which is typically lower than market value. Properties are reassessed every three years. Sample rates:
Homestead Tax Credit: Maryland’s Homestead Tax Credit limits annual assessment increases for primary residences to 10% (or less, if the county caps it lower — Montgomery County caps at 10%, Baltimore City at 4%). This provides meaningful protection against rapid assessment increases in appreciating markets, but does not reduce the base tax rate.
Maryland has the highest median household income of any US state — approximately $94,000 — driven primarily by the concentration of federal government employees, defense contractors, NIH/FDA researchers, and intelligence community workers in Montgomery and Prince George’s counties. Federal civilian pay is fully taxable in Maryland (both state and county rates apply), though federal employees receive strong retirement benefits through CSRS/FERS pension systems.
NIH, the FDA campus in Silver Spring, and dozens of federal agencies have major presence in Maryland. The National Security Agency headquarters at Fort Meade and Joint Base Andrews bring additional federal employment. The combination of high federal salaries and high combined Maryland tax rates (up to 9.45%) means many high-earning DC suburb residents face significant state/county income tax bills.
Maryland has a flat 6% sales tax with no local additions. The same rate applies in Bethesda, Ocean City, and Hagerstown. Exempt items include: groceries (unprepared food), prescription drugs, most clothing, and agricultural products. There is a 9% tax on alcoholic beverages sold for off-premises consumption, and a higher rate for certain hotel stays.
Maryland, like Virginia and Massachusetts, asserts income tax jurisdiction over domiciliaries who move abroad without clearly severing Maryland domicile. Maryland-domiciled taxpayers living overseas may owe Maryland state and county income tax on worldwide income. This is particularly relevant for State Department employees, federal contractors working overseas, and military families with Maryland as their legal state of residence. Maintaining a Maryland driver’s license, voter registration, or property ownership while abroad is typically treated as evidence of continued Maryland domicile.
| County | County Tax Rate | Max Combined Rate |
|---|---|---|
| Baltimore City | 3.2% | 9.45% (with Millionaire Surtax) |
| Montgomery County | 3.2% | 9.45% |
| Prince George’s County | 3.2% | 9.45% |
| Anne Arundel County | 2.81% | 9.06% |
| Frederick County | 2.96% | 9.21% |
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US Expat + Maryland Filing Help →Maryland’s county income tax is a mandatory local income tax levied by each of Maryland’s 23 counties and Baltimore City. It is not optional and applies to all Maryland residents. The county tax rates range from approximately 2.4% to 3.2% depending on where you live. The state collects both taxes together on a single Maryland tax return and distributes the county portion back to each county. This two-tier system means Maryland residents effectively pay among the highest combined income tax rates in the nation.
For most income levels, a Montgomery County, Maryland resident pays 5.75% state + 3.2% county = 8.95% combined. For income above $1 million, add the 0.5% Millionaire Surtax for a combined 9.45%. These are among the highest state+local income tax rates in the US, comparable to New Jersey’s 10.75% top rate and approaching California’s 13.3% top rate for very high earners.
Yes. Maryland imposes an estate tax on estates valued above $5 million (2026 threshold). Rates range from 0.8% to 16%. Critically, Maryland does not allow portability between spouses — unlike federal estate tax law, a surviving spouse cannot inherit the deceased spouse’s unused $5M exemption. This means couples with combined assets above $5M need active estate planning (typically using bypass trusts or other vehicles) to protect both exemptions. Maryland also has a separate inheritance tax at 10% for transfers to non-close family members.
No. Social Security benefits are fully exempt from Maryland income tax (both state and county portions). However, other retirement income such as private 401(k) and IRA distributions are generally taxable. Maryland provides a pension exclusion for residents aged 65+: up to $36,200 of pension income (including certain government pensions) may be excluded. The exclusion phases out at higher income levels.
Montgomery County has an effective property tax rate of approximately 1.07%, while Prince George’s County runs about 1.14%. On a $600,000 home in Montgomery County, that’s approximately $6,420/year in combined state + county property tax. Both counties apply Maryland’s Homestead Tax Credit, which limits annual assessment increases to 10%, providing some protection in rapidly appreciating markets. Baltimore City has the highest effective property tax rate in Maryland at approximately 2.25%.
Federal civilian employees’ salaries are fully subject to Maryland state and county income tax. A federal employee in Montgomery County earning $120,000 would pay approximately 5.75% state + 3.2% county = 8.95% combined on income above the lower brackets, translating to a combined Maryland income tax bill of roughly $9,500–10,000. Maryland does provide a pension exclusion for CSRS/FERS retirees aged 65+ of up to $36,200. Social Security is fully exempt. Military retirement pay is fully exempt.
Maryland is generally considered less retirement-friendly than neighboring Virginia or states like Florida and Texas, primarily due to the mandatory county income tax that applies to all retirement income (except Social Security and certain pension exclusions). The $5M estate tax with no portability also creates planning complexity for wealthier retirees. Positives: Social Security is fully exempt; there is a pension exclusion for 65+ filers; the state has strong healthcare infrastructure and proximity to DC. Many Maryland retirees with significant private retirement accounts consider relocating to Virginia (no estate tax, full military retirement exemption) or to a no-income-tax state before drawing down retirement accounts.