Maryland Tax Changes

The Maryland General Assembly ended its annual legislative session earlier this month. Here is a quick summary of important changes to the state’s tax code:

Increased income taxes for high earners

Beginning in Tax Year 2025, personal income tax rates were increased to 6.25% on income above $500,000, and to 6.5% on income above $1 million.  In addition, a 2% tax surcharge will be imposed on capital gains received by taxpayers earning over $350,000 per year.  Taxpayers earning above $200,000 per year also will have the value of their personal deductions phase out depending on the level of taxable income above that threshold.

Sales tax on data services and IT services

For transactions on and after July 1, 2025, there will be a 3% sales tax on technology and data services, and related party transactions. Further guidance on the application of this new tax is expected from the Maryland Comptroller during June 2025.

No change to estate tax exemption

A proposed reduction of the Maryland estate tax exemption, from $5 million to $2 million, was not enacted.  The Maryland estate tax exemption remains at $5 million.

Increases to government fees and excise taxes

A number of government fees will increase, effective July 1, 2025, including: The vehicle emissions inspection fee will increase from $14 to $30; The cannabis sales tax will increase from 9% to 12%; The vehicle excise tax will increase from 6% to 6.5%; The sports betting tax will increase from 15% to 20%.