How Your Maryland Paycheck is Calculated
Calculating payroll withholdings in Maryland is uniquely complex because the state uses a dual progressive income tax system. Not only do you pay progressive income taxes to the State of Maryland, but each of the state's 23 counties and the city of Baltimore also impose a mandatory **local income tax**.
Effective for tax year 2025 and 2026, the Maryland General Assembly approved significant tax hikes and adjustments to address state budget requirements. These changes expanded the state progressive tiers (adding high-earner brackets of 6.25% and 6.50% above $500,000 for singles and $600,000 for couples) and expanded the maximum allowable local county rate from 3.20% to 3.30%.
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Understanding Maryland Local County Tax Rates
Unlike other states where local taxes are simple flat fees, Maryland's county taxes act directly as a flat or progressive percentage of your Maryland taxable income. If your employer does not have your correct address data, standard state defaults tax you at the highest local rate of 3.30%.
- Standard Counties (e.g. Montgomery, Baltimore County): Flat rates of 3.20% calculated directly on Maryland taxable income.
- Dorchester & Kent Counties: Up to 3.30% (the maximum legal limit statewide).
- Anne Arundel County (Progressive): Single filers pay 2.70% on the first $50,000, 2.94% from $50,001 to $400,000, and 3.20% on income over $400,000.
- Frederick County (Progressive): Single filers pay 2.25% (first $25,000), 2.75% ($25,001-$50,000), 2.96% ($50,001-$150,000), and 3.20% above $150,000.
Maryland Standard Deductions and Exemptions
Maryland calculates standard deductions differently than the IRS. In Maryland, standard deductions are equal to **15% of your Maryland adjusted gross income (AGI)**, capped by filing-status boundaries:
Standard Deduction Limitations (2026):
Single, MFS: Minimum $1,700 | Maximum $3,350
MFJ, HOH, Surviving Spouse: Minimum $3,450 | Maximum $6,700
Personal Allowances Exemption:
Each exemption provides a **$3,200 deduction** against Maryland state taxes. This exemption gradually phases out once your Adjusted Gross Income exceeds $100,000 (Single) or $150,000 (Joint).