Maryland Tax Alert - Changes to Standard and Itemized Deductions and to State and Local Income Tax Rates from the 2025 Legislative Session

Sep 16, 2026

Maryland Tax Alert (Revised December 22, 2025) summarizes changes enacted in the 2025 legislative session affecting income tax rates and deductions. It explains local maximum income tax rate rules for tax years beginning after December 31, 2025, key county-rate adjustments for 2025 and 2026, and updated progressive state income brackets for high-income earners after December 31, 2024. The alert also covers pass-through entity rates, withholding impacts for nonresident real property transfers and gambling winnings, and increases to the standard deduction plus an itemized deduction phase-out beginning in 2025.

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Reading Time2 min

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General

Local Income Tax Rate Changes

Local Rate Changes - Tax Year 2025

Local Rate Changes - Tax Year 2026

State Income Tax Rate Changes

Impact on pass-through entities (PTE)

Impact on withholding on sale of real property by nonresidents

Impact on gambling withholding

Changes to standard and itemized deductions

Standard deduction

Itemized deduction phase-out

Maryland Tax Alert Revised December 22 , 2025 Changes to Standard and Itemized Deductionsand to State and Local Income Tax Rates from the 2025 Legislative Session This Tax Alert replaces the previous version issued on December 19, 2025 to correct the effective date of the pass-through entity tax in Section III. C. The PTE rate change applies to tax years beginning after December 31, 2024. I. General In the 2025 Session, the Maryland General Assembly enacted several changes affecting income tax rates in the Budget Reconciliation and Financing Act of 2025 , Chapter 604 of the Acts of 2025 (“the Act”) . For more details about tax law changes from the 2025 Session of the General Assembly, please visit [https://www.marylandcomptroller.gov](https://www.marylandcomptroller.gov). II. Local Income Tax Rate Changes At the local level, counties and Baltimore City may now impose a maximum local income tax rate of 3.30 percent in a tax year beginning after December 31, 2025. A. Local Rate Changes – Tax Year 2025 The Act permitted a county to retroactively increase the local income tax to rate 3.30 percent for the tax year beginning after December 31, 2024, if the county notified the Comptroller of the rate change by May 15, 2025. Dorchester County was the only county to do so, retroactively increasing its rate from 3.20 percent to 3.30 percent for tax year 2025. The chart below reflects the counties with changed local income tax rates for tax years beginning after December 31, 2024. | County | TY 2025 | | --- | --- | | Anne Arundel | 2.94%* | | Calvert | 3.20% | | Cecil | 2.74% | | Dorchester | 3.30% | | St. Mary's | 3.20% | Anne Arundel County has a progressive local income tax with three brackets. For tax years beginning after December 31, 2024, Anne Arundel County’s middle tax bracket increased to 2.94 percent for Maryland taxable net income of $50,001 though $400,000 for taxpayers with a filing status of Single, Married Filing Separately, or Dependent, and for Maryland taxable net income of $75,001 through $480,000 for taxpayers with a filing status of Married Filing Jointly, Head of Household, or Qualified Surviving Spouse. B. Local Rate Changes – Tax Year 2026 The chart below reflects the counties with changed local income tax rates for tax years beginning after December 31, 2025. | County | TY 2025 | TY 2026 | | --- | --- | --- | | Allegany | 3.03% | 3.20% | | Kent | 3.20% | 3.30% | III. State Income Tax Rate Changes The Act retains Maryland’s progressive personal income tax rate schedule up to the 5.75 percent bracket, caps that bracket, and adds two new income tax brackets for high-income earners on Maryland Taxable Income for tax years beginning after December 31, 2024, as shown in the chart below: | Rate |
Single, Married Filing Separately, Dependent |
Married Filing Jointly, Head of Household, Qualified Surviving Spouse | | --- | --- | --- | | 5.75% | $250,001- $500,000 | $300,001- $600,000 | | 6.25% | $500,001- $1,000,000 | $600,001- $1,200,000 | | 6.50% | >$1,000,000 | >$1,200,000 | Interest for underpayment of estimated tax is waived for tax year 2025 if the interest would not have been incurred but for the 2025 rate increases noted above. The Act also imposes an additional 2 percent tax on net capital gains for individuals with a federal adjusted gross income (“FAGI”) over $350,000, subject to certain exceptions, for tax years beginning after December 31, 2024. As a result of the change to the highest marginal State tax rate, the following additional impacts apply to tax years beginning after December 31, 2024 : C. Impact on pass-through entities (PTE) The rate of PTE tax for individual and fiduciary members is the sum of the highest marginal State income tax rate and the lowest county income tax rate. For periods beginning after December 31, 2024 , PTE tax rates are as follows: • 8.75 percent on individual and fiduciary members’ shares, and • 8.25 percent on e

FAQs

What does this Maryland Tax Alert revise and what effective-date correction does it address?

It replaces the December 19, 2025 version to correct the effective date of the pass-through entity tax in Section III.C. The PTE rate change applies to tax years beginning after December 31, 2024.

What local income tax rate changes are allowed for tax years after December 31, 2025?

Counties and Baltimore City may impose a maximum local income tax rate of 3.30% in a tax year beginning after December 31, 2025.

How does Maryland’s standard deduction and itemized deduction rules change for tax years after December 31, 2024 and beginning in 2025?

The Act increases the standard deduction, removes the income-based phase-in, and indexes future increases to cost-of-living adjustments. Beginning in 2025, taxpayers with FAGI above $200,000 (or $100,000 if married filing separately) must reduce otherwise allowable itemized deductions by 7.5% of FAGI above the threshold.

Sep 16, 2026

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