If you live or work in Maryland, understanding Maryland state income tax rates 2025 isn’t just smart—it’s essential for keeping more of your paycheck. The good news? Maryland’s tax structure is straightforward once you break it down. The not-so-good news? Most people overpay because they don’t know the brackets, credits, and deductions available to them. Let’s fix that right now.
Dealing with state taxes can feel overwhelming, especially when you’re juggling federal withholding, local taxes, and wondering if you’re leaving money on the table. But here’s the real talk: Maryland state income tax rates 2025 are progressive (meaning higher earners pay a higher percentage), and there are legitimate ways to reduce what you owe. Whether you’re a W-2 employee, self-employed, or retired, this guide walks you through exactly what you need to know.
Maryland State Income Tax Brackets 2025
Maryland’s state income tax rates for 2025 range from 2% to 5.75%, depending on your income level. Yes, that’s lower than many states, but it still adds up. Here’s the breakdown for single filers:
- 2% bracket: $0 to $1,000
- 3% bracket: $1,000 to $2,500
- 4% bracket: $2,500 to $3,200
- 4.75% bracket: $3,200 to $5,100
- 5.25% bracket: $5,100 to $10,300
- 5.5% bracket: $10,300 and above
- 5.75% bracket: $100,000+ (highest earners)
For married couples filing jointly, the income thresholds roughly double. The key thing to remember: you don’t pay 5.75% on your entire income if you hit the top bracket. Only the income within that bracket gets taxed at that rate. Think of it like climbing stairs—each step costs a little more, but you only pay the higher rate for the income on that specific step.
Pro Tip: Use the NC Paycheck Calculator concept (similar state-by-state calculators) to estimate your Maryland tax liability before filing. Knowing your number early lets you adjust withholding or plan quarterly payments if you’re self-employed.
How Maryland’s Progressive Tax System Works
Maryland uses a progressive tax structure, which honestly works in your favor if you understand it. Let’s say you’re single and earned $50,000 in 2025. You don’t pay 5.5% on all $50,000. Instead:
- First $1,000 taxed at 2% = $20
- Next $1,500 ($1,000–$2,500) taxed at 3% = $45
- Next $700 ($2,500–$3,200) taxed at 4% = $28
- Next $1,900 ($3,200–$5,100) taxed at 4.75% = $90.25
- Next $5,200 ($5,100–$10,300) taxed at 5.25% = $273
- Remaining $39,700 ($10,300–$50,000) taxed at 5.5% = $2,183.50
Total Maryland state income tax: $2,639.75 (about 5.28% effective rate, not 5.5%)
This is why your effective tax rate (what you actually pay) is always lower than the top bracket rate. Understanding this helps you see that progressive taxation isn’t punitive—it’s proportional. The IRS also explains tax brackets clearly on their official site, and the same logic applies to Maryland state taxes.
Who Must File in Maryland
Not everyone in Maryland needs to file a state return. Here’s the straightforward rule:
- You must file if: Your Maryland gross income exceeds $12,750 (single), $25,500 (married filing jointly), or $16,050 (head of household) for 2025.
- You should file if: You’re entitled to a refund (withheld taxes exceed what you owe) or qualify for credits like the Earned Income Tax Credit (EITC).
- Special cases: Maryland residents who work out-of-state may need to file in both states (though you’ll typically get a credit for taxes paid to other states to avoid double-taxation).
If you’re retired and receiving Social Security, Maryland doesn’t tax Social Security benefits. That’s a win. However, if you’re receiving a pension, it’s fully taxable at Maryland state rates unless you’re over 65 and meet specific income limits.
Tax Credits & Deductions You Shouldn’t Miss
This is where most Marylanders leave money on the table. Credits directly reduce your tax bill (dollar-for-dollar), while deductions reduce your taxable income. Both matter, but credits are more powerful.
- Earned Income Tax Credit (EITC): If you earn under ~$57,000 (depending on filing status and dependents), you may qualify. This credit can put hundreds back in your pocket. Check the IRS EITC page to see if you qualify.
- Child and Dependent Care Credit: If you pay for childcare to work, Maryland offers this credit. It’s often overlooked but valuable.
- Education Credits: Tuition paid for yourself or dependents may qualify for credits. Maryland also offers the Education Credit for Tuition Expenses.
- Retirement Savings Contributions Credit (Saver’s Credit): Low-to-moderate income earners who contribute to IRAs or 401(k)s may qualify.
- Standard Deduction: For 2025, Maryland’s standard deduction is $3,500 (single) or $7,000 (married filing jointly). If your itemized deductions don’t exceed this, take the standard deduction.
Warning: Don’t claim credits you don’t qualify for. The Maryland Department of Revenue audits credit claims regularly, and overstating credits can trigger penalties and interest. Real talk: it’s not worth the risk.
The Maryland Homestead Tax Credit Game-Changer
If you own a home in Maryland and your income is under $60,000 (single) or $90,000 (married), you absolutely need to know about the Maryland Homestead Tax Credit. This credit is seriously underutilized, and it can save you hundreds annually.
Here’s how it works: Maryland caps your property tax at a percentage of your income. If your property taxes exceed that threshold, Maryland credits you the difference (up to a limit). For example, if your home is assessed at $300,000 and your income is $40,000, you might be paying way too much in property taxes. The homestead credit brings that down.
To qualify:
- You must own and occupy the home as your primary residence.
- You must have lived there for at least one year.
- Your income must fall within limits (varies by county).
- You must be at least 18 years old (with exceptions for disabled persons).
The amount of the credit depends on your income and your county’s tax rate. Some homeowners save $1,000+ annually. If you own property in Maryland, file for this credit on your state return. It’s free money you’ve probably earned.
Getting Your Withholding Right
Think of your tax withholding like a subscription service: you’re pre-paying your taxes throughout the year so you don’t owe a huge bill in April. If you’re withholding too much, you’re giving Maryland an interest-free loan. Too little, and you’ll owe penalties.
To adjust your Maryland withholding:
- Complete Form MW504: This is Maryland’s withholding form. You submit it to your employer, and they adjust your paycheck accordingly.
- Use the IRS Withholding Calculator: The IRS Withholding Calculator helps you estimate federal withholding, and you can apply similar logic to Maryland.
- Review annually: Life changes (marriage, kids, new job, side income) affect your withholding. Review it yearly, especially after major life events.
- Self-employed? You’ll need to make quarterly estimated tax payments. Mark your calendar for April 15, June 15, September 15, and January 15 (for the prior year).
If you’re self-employed or have significant side income, don’t wait until April to calculate what you owe. Many self-employed Marylanders end up with surprise tax bills because they didn’t set aside enough. A simple rule: set aside 25–30% of your net self-employment income for both federal and state taxes combined.
Local Income Taxes in Maryland
Here’s something that catches people off guard: Maryland has both state and local income taxes. Some Maryland counties and municipalities impose their own income tax on top of the state rate. It’s not everywhere, but if you live in one of these areas, you need to know.
Counties with local income taxes:
- Baltimore City: 3.2%
- Montgomery County: 3.2%
- Prince George’s County: 3.2%
- Harford County: 2.75%
- Howard County: 3.1%
- Somerset County: 2.0%
- Wicomico County: 2.5%
If you live in Baltimore City and earn $50,000, you’re paying 5.5% (state) plus 3.2% (local) = 8.7% total. That’s significant. If you work in one county but live in another, you typically pay tax to the county where you work, though you may get a credit for taxes paid to your home county.
Check with your employer or the Maryland Department of Revenue website to confirm your local tax rate. It’s easy to overlook, but it directly impacts your take-home pay.
Frequently Asked Questions
Do I need to file a Maryland state return if I only worked part of the year?
– Yes, if your income exceeds the filing threshold for your filing status. However, if you had taxes withheld and your income is below the threshold, you should still file to claim a refund. Many part-time or seasonal workers are owed money.
Can I deduct federal income taxes from my Maryland state taxes?
– No, Maryland does not allow a deduction for federal income taxes paid. However, you can deduct state and local taxes (SALT) up to $10,000 on your federal return if you itemize. The two systems don’t interact that way.
What if I move out of Maryland mid-year?
– You’ll file a part-year resident return. You’ll only pay Maryland tax on income earned while you were a resident. Make sure to request an amended return if your employer withheld Maryland taxes after you moved. You may be owed a refund.
Are military pensions taxed in Maryland?
– Yes, military pensions are fully taxable at Maryland state rates. However, Maryland does exclude certain military retirement income if you’re a veteran. Check the specific rules for your situation, as they can be complex.
How do I know if I’m underpaying my estimated taxes?
– If you’re self-employed or have significant income not subject to withholding, calculate your expected tax liability and divide by four. If your quarterly payments are less than 90% of your current year tax (or 100% of last year’s tax, whichever is lower), you may owe penalties. Use Investopedia’s guide on estimated taxes for a detailed breakdown.
Can I claim the homestead tax credit if I’m renting?
– No, the homestead credit is only for homeowners. However, renters in Maryland may qualify for the Renters’ Tax Credit if they meet income and rent payment requirements. Check if you qualify.
What happens if I don’t file a Maryland return when I’m supposed to?
– The Maryland Department of Revenue can assess penalties and interest. If you owe taxes, penalties start at 5% per month (up to 25%) plus interest (currently around 8% annually). If you’re due a refund, there’s no penalty, but you’ll lose your refund after three years if you don’t file.
Do I pay Maryland tax on unemployment benefits?
– Yes, unemployment benefits are fully taxable at Maryland state rates. Your unemployment check may have federal tax withheld, but you’ll want to request additional withholding if you have other income, as the withholding may not be enough.
Is there a tax penalty for making quarterly estimated payments late?
– Yes, if your quarterly payment is late, you may owe a penalty even if you ultimately pay what you owe by April 15. The penalty is based on how much you underpaid and how late you were. It’s better to pay on time, even if the amount is small.
