Maryland, known for its rich history and vibrant culture, also has a unique set of state income tax laws that both employers and individuals need to understand. Understanding the tax landscape in Maryland can appear challenging, but with the right information, you can ensure compliance and optimize your tax situation.
This blog post will guide you through the essential aspects of Maryland state income tax for both employers and individuals.
For Employers: Maryland State Income Tax Responsibilities
Withholding Requirements
As an employer in Maryland, you are responsible for withholding state income taxes from your employees’ wages. Here’s what you need to know:
Registration: Employers must register with the Maryland Comptroller’s Office. This can be done online through the Maryland Combined Registration Online Application.
Withholding Tax Rate: The amount of tax withheld depends on the employee’s earnings and the number of allowances claimed on their Maryland Form MW507.
Filing Frequency: The filing frequency for withholding tax returns depends on the amount of tax withheld
- Accelerated: Employers who were required to withhold $15,000 or more for the preceding calendar year and also accumulate $700 of withholding tax in any pay period must file taxes semi-weekly. They are required to remit the taxes withheld by the Wednesday following the pay date, if the payday falls on a Wednesday, Thursday, or Friday. If the payday falls on a Saturday, Sunday, Monday, or Tuesday, they must remit by the following Friday.
- Quarterly: Employers with less than $700 of withholding per quarter file quarterly. They must remit the tax withheld by the last day of the month following the end of the quarter (April 30, July 31, October 31, and January 31 for quarters ending March 31, June 30, September 30, and December 31, respectively).
- Monthly: Employers with more than $700 of withholding in any one quarter file monthly. They must remit the tax withheld by the 15th day of the following month.
- Seasonally: Employers who operate only during certain months must obtain prior approval to file seasonally and follow the designated filing and remittance schedule.
- Annually: Employers with less than $250 withholding per calendar year are required to remit the tax withheld on an annual basis by January 31st of the following year.
Forms: Employers must file Form MW506 (Employer’s Return of Income Tax Withheld) and Form MW508 (Annual Employer Withholding Reconciliation Report). Additionally, Form W-2 must be submitted to the state by January 31st of each year.
For Individuals: Maryland State Income Tax Overview
Tax Rates and Brackets
Maryland uses a progressive tax system with rates ranging from 2.00% to 5.75% based on income levels. Here are the 2024 tax brackets for single filers, married individuals filing separately, dependent taxpayers, and fiduciaries:
| Taxable Net Income | Maryland Tax Calculation |
| $0 – $1,000 | 2.00% of taxable income |
| $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 5.00% 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 5.50% of the excess over $150,000 |
| Over $250,000 | $12,760.00 plus 5.75% of the excess over $250,000 |
Here are the 2024 tax brackets for taxpayers filing joint returns, head of household, or qualifying widows/widowers:
| Taxable Net Income | Maryland Tax Calculation |
| $0 – $1,000 | 2.00% of taxable income |
| $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 – $150,000 | $90 plus 4.75% of the excess over $3,000 |
| $150,000 – $175,000 | $7,072.50 plus 5.00% 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 |
Filing Requirements
Residents and part-year residents of Maryland are required to file a Maryland state tax return if their gross income exceeds the minimum filing requirement. Non-residents who earn income from Maryland sources also need to file a return.
Due Dates for Filing
Calendar Year Taxpayers: Returns are due by April 15th of the following year.
Fiscal Year Taxpayers: Returns are due by the 15th day of the fourth month after the close of the fiscal year.
Extensions
Maryland allows an automatic six-month extension to file (until October 15th) if you cannot file your return by the due date. However, this extension does not apply to payment of taxes owed.
Payment of Taxes
Taxes owed must be paid by the original due date (April 15th for calendar year taxpayers) to avoid penalties and interest.
Deductions and Credits
Maryland offers several deductions and credits, including:
- Standard Deduction: For tax year 2023 up to $2,550 for single filers and $5,150 for head of household, surviving spouse, and joint filers.
- Personal Exemptions: The exemption amount of $3,200 for Maryland state income tax begins to phase out if your federal adjusted gross income (AGI) exceeds $100,000 for single filers (or $150,000 for joint taxpayers). The $3,200 exemption is fully phased out when your federal AGI exceeds $150,000 for single filers (or $200,000 for joint taxpayers).
- Earned Income Tax Credit (EITC): Maryland has a state EITC in addition to the federal EITC.
- Other Credits: Various credits for things like retirement income, child and dependent care expenses, and college savings contributions.
Tips for Both Employers and Individuals
- Stay Updated: Tax laws can change, so it’s important to stay informed about the latest updates from the Maryland Comptroller’s Office.
- Use Online Resources: Utilize online tools and resources provided by the Maryland Comptroller’s Office for filing and information.
- Consult a Tax Professional: Consider seeking advice from a tax professional to ensure you’re taking advantage of all available deductions and credits.
Conclusion
Whether you’re an employer or an individual, understanding Maryland state income tax is crucial for compliance and financial planning. By keeping informed about the latest tax rates, filing requirements, and available deductions and credits, you can navigate Maryland’s tax landscape with confidence. Always remember to consult with a tax professional for personalized advice tailored to your specific situation.
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This article has been updated from its original publication date of August 19, 2024.