Maryland Tax Law Changes Now in Effect: What Individual Taxpayers Need to Know
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As of July 1, 2025, several updates to Maryland's tax structure have officially taken effect, impacting how individual residents may owe in state income taxes.
Here is a brief overview of the key changes for individuals and joint filers.
Higher Tax Brackets for High-Income Earners
Maryland has added two new tax brackets for high-income earners. As of July 1, 2025, if your income exceeds certain thresholds, you may see slightly higher tax rates on portions of that income.
Understanding How Maryland’s Tax Brackets Work
Maryland uses a progressive income tax system, meaning your tax rate increases as your income does. Each income range below includes:
A base tax amount – what you owe up to the start of an income range
A percentage rate – applies only to the portion of your income that falls above the starting point of that threshold
Current 2024 Income Tax Brackets for Individuals
Up to $1,000: 2%
$1,000-$2,000: $20 plus 3.00% of the excess over $1,000
$2,000-$3,000: $50 plus 4.00% of the excess over $2,000
$3,000-$100,000: $90 plus 4.75% of the excess over $3,000
$100,000-$125,000: $4,697.50 plus 5% of the excess over $100,000
$125,000-$150,000: $5,947.50 plus 5.25% of the excess over $125,000
$150,000-$250,000: $7,260.00 plus 5.5% of the excess over $150,000
$250,000-$500,000: $12,760.00 plus 5.75% of the excess of $250,000
For Joint Filers
$3,000-$150,000: $90 plus 4.75% of the excess over $3,000
$150,000-$175,000: $7,072.50 plus 5% of the excess over $150,000
$175,000-$225,000: $8,322.50 plus 5.25% of the excess over $175,000
$225,000-$300,000: $10,947.50 plus 5.50% of the excess over $225,000
Over $300,000: $15,072.50 plus 5.75% of the excess over $300,000
New 2025 Income Tax Brackets
Effective July 1, 2025, the following new tax brackets have been added, affecting income levels above the current highest bracket.
For Individuals
$500,001-$1,000,000: 6.25%
Over $1,000,000: 6.5%
For Joint Filers
$600,000-$1,200,000: 6.25%
Over $1,200,000: 6.5%
Important Note: These new rates apply only to the portion of income that falls within those higher brackets – not your entire income.
New 2% Capital Gains Surtax
If your federal adjusted gross income (AGI) exceeds $350,000, and you report capital gains, you may now be subject to a new 2% surtax on those gains.
This surtax is separate from your standard income tax rates
Applies only to qualifying capital gains; some exceptions may apply
Changes to Itemized Deductions
If you itemize your deductions, a higher income may reduce how much you’re allowed to deduct based on your income.
If your AGI is over $200,000 (or $100,000 for separate filers), your total itemized deductions may be reduced by 7.5% of that amount
Local Income Tax Rate Adjustment
Maryland has raised the maximum rate that counties are allowed to charge for local income tax.
2024: 3.2%
2025: 3.3%
Important Note: Your actual rate applied will depend on the specific county of residence, as local jurisdictions have the authority to set their rates within the state-mandated range.
Expansion of Sales Tax to Digital and IT Services
Maryland is expanding its general sales tax to cover digital and information technology (IT) services, including a 3% tax rate to:
Cloud computing
Data processing
Web hosting
Software publishing
Various IT consulting services
What This Means for You
While these changes primarily impact individuals with higher incomes, they could affect various tax sectors. It’s important to review these changes and consult with your tax advisor to understand the specific implications for your tax plan and ensure compliance.
Questions
Have questions about how these changes may impact you? Our team of experts is here to help. Contact us.