Maryland State Income Tax Rates and Brackets for 2025 Explained

Key Takeaways

• Maryland adds two new top tax brackets at 6.25% and 6.5% for 2025.
• Counties can increase local tax caps to 3.3% and use progressive rates.
• A 2% capital gains surtax applies to individuals with federal AGI over $350,000.

Maryland has made important changes to its state income tax rates and brackets for the 2025 tax year. These changes, which come from the Budget Reconciliation and Financing Act of 2025, were signed into law by Governor Wes Moore on May 27, 2025. The new rules affect how much tax people pay based on their income, especially for those earning higher amounts. They also change how much counties can charge in local taxes and introduce new rules for deductions and capital gains. Here’s a clear breakdown of what’s changed, who is affected, when the changes take effect, what actions taxpayers need to take, and what these changes mean for people living and working in Maryland.

Summary of What Changed

The most important updates to Maryland’s state income tax system for 2025 include:

• Two new higher tax brackets for top earners, with rates of 6.25% and 6.5%.
• Increased county income tax cap from 3.2% to 3.3%, with counties now allowed to use progressive local tax rates.
• A new 2% capital gains surtax for individuals with high federal adjusted gross income (AGI).
• Higher standard deductions for all taxpayers.
• Limits on itemized deductions for higher-income taxpayers.

All these changes are part of Maryland’s plan to raise more money for public services and address budget needs by asking wealthier residents to pay more. The changes also give counties more power to set their own local tax rates, which could lead to differences in taxes depending on where someone lives in Maryland.

Who Is Affected by the Changes

These tax updates affect a wide range of people living or working in Maryland:

• High-income earners: Those with taxable income over $500,000 (single) or $600,000 (married filing jointly) will pay higher state income tax rates.
• Taxpayers with large investment income: People with federal AGI over $350,000 and significant capital gains will face a new 2% surtax.
• All Maryland residents: Everyone will see a higher standard deduction, which can lower taxable income.
• Taxpayers who itemize deductions: Those with higher incomes will have to reduce their itemized deductions.
• Residents in counties that raise local taxes: If a county increases its local income tax rate, residents there will pay more.
• Immigrants and newcomers: Anyone moving to Maryland, including immigrants, should be aware of these new tax rates and rules, as they may affect their take-home pay and cost of living.

Effective Dates

• All changes apply to taxable years beginning after December 31, 2024. This means the new rules are in effect for the 2025 tax year and beyond.
• Taxpayers will first see the impact when they file their 2025 Maryland state income tax returns in 2026.

Maryland State Income Tax Rates and Brackets for 2025

Maryland uses a progressive income tax system. This means the more you earn, the higher your tax rate. For 2025, the state has added two new brackets for people with very high incomes. Here’s how the new brackets look:

For Single Filers:

• $0 – $1,000: 2.00%
• $1,000 – $2,000: 3.00%
• $2,000 – $3,000: 4.00%
• $3,000 – $100,000: 4.75%
• $100,000 – $125,000: 5.00%
• $125,000 – $150,000: 5.25%
• $150,000 – $250,000: 5.50%
• $250,000 – $500,000: 5.75%
• $500,001 – $1,000,000: 6.25% (new)
• Over $1,000,000: 6.50% (new)

For Married Filing Jointly:

• $0 – $1,000: 2.00%
• $1,000 – $2,000: 3.00%
• $2,000 – $3,000: 4.00%
• $3,000 – $150,000: 4.75%
• $150,000 – $175,000: 5.00%
• $175,000 – $225,000: 5.25%
• $225,000 – $500,000: 5.50%
• $500,000 – $600,000: 5.75%
• $600,001 – $1,200,000: 6.25% (new)
• Over $1,200,000: 6.50% (new)

Key Points:

• The 6.25% rate starts at $500,001 for single filers and $600,001 for married couples.
• The 6.5% rate applies to income over $1,000,000 for singles and $1,200,000 for married couples.

These new brackets mean that people with the highest incomes will pay more in state taxes than before. For most taxpayers, the rates remain the same, but those with very high incomes will see a noticeable increase.

County Income Tax Rates

Maryland counties can charge their own local income tax on top of the state tax. Before 2025, the highest county tax rate allowed was 3.2%. The new law raises this cap to 3.3%. Counties can now:

• Increase their local income tax rate up to 3.3%.
• Switch to a progressive local tax system (different rates for different income levels), as long as the change does not bring in more money than the old flat rate.

This means that depending on where you live in Maryland, your total income tax bill could go up if your county decides to raise its rate. Some counties may also choose to make their local tax rates progressive, which could affect people differently based on their income.

Capital Gains Surtax

A new 2% surtax applies to capital gains (profit from selling investments like stocks or property) for individuals with federal AGI over $350,000. This surtax is added to the regular state income tax. However, some types of capital gains are excluded, such as:

• Gains from selling your main home
• Gains from retirement accounts

This surtax is important for people who have large investment income, as it increases the total tax they will pay on those gains.

Standard Deduction and Itemized Deduction Changes

The standard deduction is the amount you can subtract from your income before calculating your tax. For 2025, Maryland has increased the standard deduction:

• Joint filers, heads of household, and surviving spouses: Increased from $5,600 to $6,700
• Other taxpayers: Increased from $2,800 to $3,350

This change helps lower- and middle-income taxpayers by reducing the amount of income that is taxed.

For those who itemize deductions (list out specific expenses like mortgage interest or charitable donations), there is a new rule for higher-income taxpayers:

• If your federal AGI is over $200,000 ($100,000 if married filing separately), you must reduce your itemized deductions by 7.5% of the amount over the threshold.

This means that higher-income taxpayers will not be able to deduct as much, which could increase their taxable income and the amount of tax they owe.

Required Actions for Taxpayers

If you live or work in Maryland, here’s what you should do:

• Review your income: Check if your income falls into one of the new higher tax brackets.
• Check your county’s tax rate: Find out if your county plans to raise its local income tax rate for 2025.
• Consider the capital gains surtax: If you have large investment income and your federal AGI is over $350,000, plan for the new 2% surtax.
• Decide on deductions: With the higher standard deduction, some people may benefit more from taking the standard deduction instead of itemizing.
• Plan for reduced itemized deductions: If you have a high income and usually itemize, calculate how much your deductions will be reduced.
• Update your tax withholding: If you expect to owe more tax, you may want to adjust your paycheck withholding or make estimated tax payments to avoid a big bill at tax time.
• Consult a tax professional: If you’re unsure how these changes affect you, especially if you have complex finances or are new to Maryland, consider getting advice from a tax expert.

Implications for Pending Applications and New Residents

For people who have recently moved to Maryland or are planning to move, including immigrants and workers on visas, it’s important to understand how these changes could affect your finances:

• Pending tax returns for 2024 are not affected. The new rates and rules apply only to tax years starting January 1, 2025.
• New residents should check how the state income tax rates and county rates compare to their previous location. This is especially important for those coming from states with no income tax or lower rates.
• Employers should update payroll systems to reflect the new rates starting in 2025.
• Immigrants and international workers should be aware that Maryland’s progressive tax system means higher earners pay a larger share of their income in taxes. This could affect decisions about where to live or work within the state.

Broader Context and Policy Goals

The changes in Maryland’s state income tax rates and brackets are part of a larger effort to address budget shortfalls and fund important public services. By increasing taxes on higher-income residents and investment income, the state hopes to raise more money for schools, healthcare, and other needs. At the same time, the higher standard deduction helps lower- and middle-income families by reducing their taxable income.

The new rules also give counties more flexibility to set their own tax policies, which could lead to more differences in tax rates across Maryland. Some counties may choose to raise their rates or make them progressive, while others may keep rates the same.

Expert Analysis

According to analysis by VisaVerge.com, Maryland’s approach follows a growing trend among states to make income taxes more progressive. This means asking those who earn more to pay a higher percentage of their income in taxes. The new capital gains surtax is especially important because it does not have an end date, showing that Maryland plans to keep this rule for the long term.

Experts also point out that allowing counties to use progressive local taxes could make the tax system more complicated, as people in different counties may pay different rates based on both their income and where they live. The higher standard deduction helps many taxpayers, but it does not fully balance out the higher rates for top earners.

Future Outlook

Looking ahead, Maryland’s tax policy for 2025 may be just the beginning. Lawmakers could make more changes in future years, especially if the state’s budget needs change or if there is pressure to adjust the new surtaxes or local tax rules. Taxpayers should keep an eye on county decisions about local tax rates, as these could change from year to year.

Official Resources

For the most up-to-date information, taxpayers should visit the Maryland Comptroller’s Office website. This site provides official tax rate tables, forms, and guidance for both individuals and businesses. If you have specific questions, you can contact the Comptroller’s Office directly using the contact information on their website.

Key Takeaways and Next Steps

• Maryland’s state income tax rates for 2025 now include two new top brackets at 6.25% and 6.5%.
• County income tax caps have increased to 3.3%, and counties can use progressive rates.
• A new 2% capital gains surtax applies to high earners with large investment income.
• The standard deduction is higher, but itemized deductions are limited for those with higher incomes.
• All changes take effect for the 2025 tax year (returns filed in 2026).
• Check your income, county tax rate, and deduction options to see how these changes affect you.
• Stay informed about future changes by checking official government resources.

By understanding these updates and planning ahead, Maryland residents—including immigrants and newcomers—can better manage their tax responsibilities and avoid surprises when filing their 2025 tax returns.

Learn Today

Income Tax Brackets → Income ranges taxed at specific rates under Maryland’s progressive tax system for different earners.
Capital Gains Surtax → An additional 2% tax on investment profits for individuals with high federal adjusted gross income.
Standard Deduction → A fixed amount subtracted from taxable income to reduce the tax burden on taxpayers.
Itemized Deductions → Specific expenses like mortgage interest or donations subtracted from income, limited for high earners now.
Progressive Tax → A tax system where rates increase as income rises, affecting higher earners more.

This Article in a Nutshell

Maryland’s 2025 tax changes introduce higher brackets, a 2% capital gains surtax, and increased county tax caps. These updates affect high earners and empower counties with progressive local taxes, while raising the standard deduction for all taxpayers to ease burdens on lower incomes.
— By VisaVerge.com