Tool | November 2018

State-by-State Guide to Taxes on Retirees

Maryland

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The Bottom Line
Map of Maryland

Least tax friendly

Maryland doesn’t tax Social Security benefits. If you are 65 or older or totally disabled (or your spouse is totally disabled), you qualify for an exclusion of up to $29,400 on distributions from 401(k), 403(b) and 457 plans, along with income from public and private pensions.

But here's the hitch: Any income outside those exclusions will be heavily taxed in the Free State. In addition to the state income tax (which has a top rate of 5.75%, Maryland's 23 counties and Baltimore City may levy additional income taxes ranging from 1.75% to 3.20% of taxable income.

State Sales Tax

6% state levy. No local taxes.

Income Tax Range

Low: 2% (on less than $1,000 of taxable income)

High: 5.75% (on more than $250,000 of taxable income for single filers; more than $300,000 for joint filers)

Maryland’s 23 counties and Baltimore City may levy additional income taxes ranging from 1.75% to 3.20% of taxable income; per the Tax Foundation, the average levy is 2.9%.

Social Security

Benefits are not taxed.

Exemptions for Other Retirement Income

Railroad Retirement income is not taxed. If you are 65 or older or totally disabled (or your spouse is totally disabled), you may qualify for Maryland's maximum pension exclusion, which is $29,000, under certain conditions. Distributions from 401(k), 403(b) and 457 plans can qualify for the pension exclusion. Foreign (out-of-country) government pensions do not qualify for the exemption. If you are a retired member of the military and at least 65 years old by December 31, you may be able to subtract up to $10,000 of your military pension from your federal adjusted gross income. If you or your spouse is 65 or over or blind, you are entitled to an extra $1,000 personal exemption, in addition to the regular personal exemption that you may be entitled to.

IRAs

Distributions do not qualify for the pension exclusion.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for the pension exclusion of up to $29,000.

Private Pensions

Qualifies for the pension exclusion of up to $29,000.

Public Pensions

Qualifies for the pension exclusion of up to $29,000. Foreign (out-of-country) government pensions do not qualify for the exemption. If you are a retired member of the military and at least 65 years old by December 31, you may be able to subtract up to $10,000 of your military pension from your federal adjusted gross income.

Property Taxes

The Homeowners' Property Tax Credit Program allows credits against a homeowner's property tax bill if the property taxes exceed a fixed percentage of the person's gross income.

The median property tax on Maryland's median home value of $290,400 is $3,191.

Tax breaks for seniors: A property tax deferral program allows residents 65 or older to defer the increase in their tax bill for county taxes. The deferred taxes become a lien on the property and must be repaid when the property is transferred.

A Renters' Tax Credit program provides up to $1,000 a year for those age 60 and older; income limits apply.

Vehicle Taxes

Sales tax is collected.

Inheritance and Estate Taxes

Maryland estate tax is imposed on estates exceeding $4 million. The Free State’s estate tax exemption will rise to $5 million in 2019 but won’t be indexed to inflation going forward. While Maryland has an inheritance tax (with a flat 10% rate), the list of heirs exempt from paying it is long.

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