Maryland state income tax rate is 5.75 percent which is below the average of its neighbors, but higher than all other states except West Virginia and Pennsylvania As a Maryland resident, you are required to file a state income tax return if you earn ordinary income. Ordinary income includes wages from a job or business, profits from a partnership or S corporation, interest and dividends, rental property income, royalties, and most retirement account distributions. It does not include long-term capital gains or qualified dividends, which are subject to a different set of rules and typically have lower taxes rates.
You can find all the necessary forms and instructions on the Comptroller’s website. You can also download a free online filing app to speed up the process. It’s best to complete your federal tax return first, then transfer the information to your state tax return.
Maryland Income Tax Exemptions
The commonwealth offers a number of deductions and credits. One of the most popular is the homestead exemption, which caps annual increases in your property’s assessed value for property tax purposes to 10 percent. Other tax breaks include a depreciation allowance and a dividend addback. The state also offers a credit for employers who invest in payroll and property here, as well as an enhanced business investment tax credit.
Employees must complete a Maryland income tax withholding certificate (MW507), which tells their employer how much Maryland state income tax to withhold from their wages. The form requires employees to provide their name, address, Social Security number, filing status, and exemption information. Exceptions to the requirement to withhold Maryland income tax include military spouses, nonresidents and those receiving annuities, sick pay or retirement distributions.
The Maryland income tax filing deadline for tax year 2023 is April 16, 2024.