Article
8 min read
Understanding Maryland Income Tax Rates, Filing, and Employer Guidelines
US payroll
Author
Shannon Ongaro
Last Update
November 28, 2025
Table of Contents
Does Maryland have state income tax?
Maryland state income tax brackets (2025)
Maryland local county income tax (2025)
Residency and filing status rules
Maryland income tax deductions and credits
Filing and payment requirements for employers
Unemployment Insurance (UI) requirements
What employers should know
How Deel simplifies Maryland payroll
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Key takeaways
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Maryland uses a progressive income tax system, with rates ranging from 2.00% to 6.5%.
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Employers must register with the Comptroller of Maryland for withholding and the Maryland Department of Labor for unemployment insurance (UI).
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Deel Payroll - US helps employers automate tax rate updates, filings, and payments across all 50 states, including Maryland.
Running payroll in Maryland means managing federal tax, state income tax, local county tax, and unemployment insurance obligations, all under different agencies. This guide explains how Maryland’s 2025 payroll taxes work, who they apply to, and the step-by-step compliance requirements for employers.
Does Maryland have state income tax?
Yes. Unlike states with only one flat tax, Maryland employers handle two layers of withholding: a state income tax and a local county tax. Each county sets its own rate, and employers must withhold both from employee paychecks.
Employers also handle:
- Unemployment Insurance (UI) reporting via the BEACON portal
- New hire reporting within 20 days of the employee’s start date
- Electronic filing for all state and local withholding forms
Maryland state income tax brackets (2025)
Maryland’s rates begin at 2% and increase progressively to 6.50%. Employers should use the official graduated tables from the Comptroller of Maryland.
Tax Rate Schedule I
(Single, Married Filing Separately, Dependent Taxpayers, Fiduciaries)
| Taxable Net Income | Maryland Tax Calculation |
|---|---|
| $1 – $1,000 USD | 2% of taxable income |
| $1,001 – $2,000 | $20 + 3% of amount over $1,000 |
| $2,001 – $3,000 | $50 + 4% of amount over $2,000 |
| $3,001 – $100,000 | $90 + 4.75% of amount over $3,000 |
| $100,001 – $125,000 | $4,697.50 + 5% of amount over $100,000 |
| $125,001 – $150,000 | $5,947.50 + 5.25% of amount over $125,000 |
| $150,001 – $250,000 | $7,260 + 5.50% of amount over $150,000 |
| $250,001 – $500,000 | $12,760 + 5.75% of amount over $250,000 |
| $500,001 – $1,000,000 | $27,135 + 6.25% of amount over $500,000 |
| $1,000,001 and over | $58,385 + 6.50% of amount over $1,000,000 |
Tax Rate Schedule II
(Married Filing Jointly, Head of Household, Qualifying Surviving Spouse)
| Taxable Net Income | Maryland Tax Calculation |
|---|---|
| $1 – $1,000 | 2% of taxable income |
| $1,001 – $2,000 | $20 + 3% of amount over $1,000 |
| $2,001 – $3,000 | $50 + 4% of amount over $2,000 |
| $3,001 – $150,000 | $90 + 4.75% of amount over $3,000 |
| $150,001 – $175,000 | $7,072.50 + 5% of amount over $150,000 |
| $175,001 – $225,000 | $8,322.50 + 5.25% of amount over $175,000 |
| $225,001 – $300,000 | $10,947.50 + 5.50% of amount over $225,000 |
| $300,001 – $600,000 | $15,072.50 + 5.75% of amount over $300,000 |
| $600,001 – $1,200,000 | $32,322.50 + 6.25% of amount over $600,000 |
| $1,200,001 and over | $69,822.50 + 6.50% of amount over $1,200,000 |
Maryland local county income tax (2025)
Maryland’s 23 counties and Baltimore City levy local income taxes in addition to the state rate. These taxes are based on taxable income, not state tax owed, and must be withheld by employers according to the employee’s county of residence.
| County / Jurisdiction | 2025 Local Tax Rate | Notes |
|---|---|---|
| Allegany | 3.03% | — |
| Anne Arundel | 2.70% – 3.20% | Progressive by income: 2.70% (≤ $50 k single / $75 k joint); 2.94% (midrange); 3.20% (over $400 k / $480 k) |
| Baltimore County | 3.20% | — |
| Calvert | 3.20% | — |
| Caroline | 3.20% | — |
| Carroll | 3.03% | — |
| Cecil | 2.74% | — |
| Charles | 3.03% | — |
| Dorchester | 3.30% | Highest local rate statewide (2025) |
| Frederick | 2.25% – 3.20% | Progressive by income: 2.25% (≤ $25 k); 2.75% ($25–50 k); 2.96% (midrange); 3.20% (upper tiers) |
| Garrett | 2.65% | — |
| Harford | 3.06% | — |
| Howard | 3.20% | — |
| Kent | 3.20% | — |
| Montgomery | 3.20% | — |
| Prince George’s | 3.20% | — |
| Queen Anne’s | 3.20% | — |
| St. Mary’s | 3.20% | — |
| Somerset | 3.20% | — |
| Talbot | 2.40% | — |
| Washington | 2.95% | — |
| Wicomico | 3.20% | — |
| Worcester | 2.25% | — |
| Baltimore City | 3.20% | — |
Several counties (Anne Arundel, Frederick, and Dorchester) now use progressive local rates, and the maximum allowable county rate increased to 3.30% effective 2025. Nonresidents working in Maryland pay a state nonresident tax at the lowest local rate (2.25%), in addition to applicable state income tax.
Residency and filing status rules
Residency determines which income Maryland taxes:
- Residents: Taxed on all income
- Part-year residents: Taxed on income earned while domiciled in Maryland
- Nonresidents: Taxed only on Maryland-source income
Employees declare their filing status and exemptions on Form MW507. Employers use this form to calculate the correct state and county withholding.
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Maryland income tax deductions and credits
In Maryland, each personal exemption is valued at $3,200 for the 2025 tax year. Employees with higher incomes or significant itemized deductions may need to adjust the number of exemptions they claim on Form MW507 to ensure accurate withholding throughout the year.
While employers use this form to calculate state and local tax withholding, any tax credits, such as the Maryland Earned Income Credit, are applied only when employees file their annual state income tax returns, not during payroll processing.
Filing and payment requirements for employers
To stay compliant, follow these filing and reporting steps:
| Task | Form / Portal |
|---|---|
| Register for withholding and UI accounts | Maryland Business Express / BEACON Portal |
| Collect Form MW507 from every employee | MW507 |
| Withhold state + local income tax from wages | Official 2025 Withholding Tables |
| File quarterly tax returns | Form MW506 |
| Reconcile annually by Jan 31 | Form MW508 |
| Provide employees with W-2s | Federal Form W-2 |
| Report new hires within 20 days | Maryland New Hire Registry |
| File and pay electronically | mdtaxconnect.gov |
| File UI wage and contribution reports | BEACON Portal |
Tip: Maryland no longer mails paper coupon books by default. Electronic filing is the state standard.
Unemployment Insurance (UI) requirements
The Maryland Department of Labor oversees employer UI contributions through its BEACON system.
- Reports: Filed quarterly
- Wage base: Set annually; verify via the Department of Labor site
- Rates: Assigned based on employer experience
- Zero-wage reports: Required if no wages are paid that quarter
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What employers should know
Payroll implications
Accurate Maryland withholding requires integrating both state and county rates. Payroll software or providers must track county of residence—not just workplace location—to prevent under- or over-withholding.
Remote work
If employees live in Maryland but work remotely elsewhere, or vice versa, verify whether Maryland considers that income “sourced” in-state. Generally, if the direction and control of work are in Maryland, withholding applies.
Business tax obligations
In addition to payroll, businesses may owe:
- Sales and use tax (6%)
- Corporate income tax (for entities operating in-state)
- Local property taxes (set by the county)
How Deel simplifies Maryland payroll
Maryland’s payroll system is complex, combining progressive state taxes, variable county rates, and strict filing schedules. Employers who automate compliance—including rate updates, local tax logic, and quarterly filings—save time and avoid penalties.
Deel Payroll - US keeps payroll aligned across all 50 states. It instantly calculates payroll taxes, syncs direct deposits and payslips with your accounting software, and is supported by a team of 350+ in-house payroll and legal experts for guidance on US labor laws, state registration, and more.
For companies operating across several states, Deel PEO expands compliance coverage even further. As the employer of record, Deel handles all payroll, tax, HR, and benefits obligations in every jurisdiction to ensure filings, rates, and remittances remain accurate and on time.
To learn more about how Deel can support your US payroll operations, book a free 30-minute demo with an expert.
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Disclaimer: This article is for informational purposes only and does not constitute legal, accounting, or tax advice. Seek the assistance of qualified professionals for personalized help with legal, tax, and accounting matters.
Shannon Ongaro is a content marketing manager and trained journalist with over a decade of experience producing content that supports franchisees, small businesses, and global enterprises. Over the years, she’s covered topics such as payroll, HR tech, workplace culture, and more. At Deel, Shannon specializes in thought leadership and global payroll content.
