Maryland (MD) Retirement Taxes 2026: Both Death Taxes

How Maryland taxes retirement income (statute-cited)

Both death taxes, explained (and what didn’t change)

Probate costs

Is Maryland a good state to retire in for taxes?

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2026 edition · statute-cited · part of Clear Money Guide’s 51-state retirement tax series. This guide covers state taxes on retirement income and estate transfers; property and sales taxes vary by county and are outside its scope.

Updated July 24, 2026. Quick answer: Maryland’s reputation as a high-tax state for retirees comes from three things most guides only half-explain: it is the only state levying both an estate tax and an inheritance tax; its counties add their own income tax of up to 3.3% on top of the state’s graduated rates (to 6.5%); and its pension exclusion, up to $40,600 for tax year 2026 ($41,200 for tax year 2025, indexed) at 65+, does not cover traditional IRA distributions at all. Social Security, at least, is never taxed.

Federal civil service pensions in Maryland: does Maryland tax federal pensions.

State retirement-income forms, line by line: Maryland Form 502R.

Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Maryland tax on inherited IRA withdrawals.

Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Maryland tax 403(b) and 457(b) withdrawals.

Drawing a pension? Whether the state withholds tax from it, from its own documents: Maryland tax withholding on pension payments.

Before the tax question, the Maryland Law Enforcement Officers’ Pension System options, DROP and refund rules, from the State Retirement Agency’s own documents: Maryland LEOPS retirement decisions.

Married, or planning for a spouse’s death? Whether the state is a community property state, from its own statutes: Is Maryland a community property state?.

Selling your home? How the state taxes the profit, from its own tax documents: Does Maryland tax the profit from selling your home?.

Before the tax question, the Baltimore Fire and Police Employees’ Retirement System options, DROP and refund rules, from the system’s own documents: Baltimore fire and police retirement decisions.

The state’s income tax schedule: the Maryland tax brackets for 2026.

Before the tax question, the Montgomery County Employees’ Retirement System options, refund and survivor rules, from the county’s own documents: Montgomery County Maryland retirement decisions.

Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Maryland tax withholding on IRA and 401(k) withdrawals.

For a pension earned elsewhere or paid after you move: does Maryland tax out-of-state pensions.

Looking ahead to 2027? The state’s estate tax exemption for deaths in 2027, from its own tax documents: Maryland estate tax exemption 2027.

Before the tax question, the Baltimore city employees’ pension options and refund rules, from the system’s own summaries: Baltimore ERS retirement decisions.

For trust income specifically: does Maryland tax trust income.

For dividends and interest specifically: does Maryland tax dividends and interest.

For annuity payments specifically: does Maryland tax annuity income.

Saving for a child’s college? The state’s 529 break has its own page: Maryland 529 plan tax deduction.

For military retired pay: does Maryland tax military retirement.

For the sale of stocks, funds or real estate: does Maryland tax capital gains.

For 401(k) and IRA withdrawals specifically: does Maryland tax 401(k) and IRA withdrawals.

How Maryland taxes retirement income (statute-cited)

Income tax	Graduated to 6.5% (10 brackets; 6.25%/6.5% top brackets added TY2025) plus county income tax up to 3.3% — the local layer most guides omit
Social Security	Not taxed (fully subtracted)
Pension exclusion (65+ or disabled)	Up to $40,600 for tax year 2026 ($41,200 for tax year 2025), indexed to the maximum Social Security benefit, with the Comptroller publishing each year’s figure, reduced by Social Security received (Md. Tax-Gen. §10-209)
The IRA trap	The exclusion applies only to employer-sponsored plans (pensions, 401(k), 403(b)) — traditional IRA distributions do not qualify and are fully taxable, a distinction that surprises rollover retirees
Public safety retirees (55+)	Separate $15,000 subtraction
Military retirement	$12,500 under 55; $20,000 at 55+ (Md. Tax-Gen. §10-207)

Planning note: because the exclusion covers a 401(k) but not an IRA, rolling an employer plan into an IRA before retiring in Maryland can convert excludable income into fully-taxable income. Sequence rollovers with this rule in mind.

Both death taxes, explained (and what didn’t change)

Estate tax: $5,000,000 exemption (fixed since 2019, not indexed), graduated rates up to 16%, with Maryland-only spousal portability. Inheritance tax: a flat 10% on “collateral” beneficiaries — nieces, nephews, cousins, friends, unmarried partners — while spouses, children and other lineal descendants, parents, grandparents, siblings, and stepchildren are exempt (as are transfers under $1,000). Inheritance tax paid is credited against any estate tax due, so the two don’t stack. Worked example: a $200,000 bequest to a niece costs $20,000; the same bequest to a sibling costs $0 — unlike Pennsylvania, Maryland exempts siblings.

Dated status note (July 2026): Governor Moore’s FY2026 proposals to repeal the inheritance tax and cut the estate exemption to $2M were rejected — the Budget Reconciliation and Financing Act of 2025 (HB 352) left both taxes unchanged. Guides describing those proposals as law are wrong. National context: estate tax by state · inheritance tax by state.

Probate costs

Unless the will provides a larger measure of compensation, a Maryland court may allow personal-representative commissions of up to 9% of the first $20,000 of property subject to administration plus 3.6% of the excess over $20,000 (Md. Est. & Trusts §7-601). Register of Wills probate fees scale with estate value (no fee below $50,000, $100 from $50,000 to $100,000, rising to $10,000 plus 0.02% of the value over $10,000,000). Small estates: $50,000 — or $100,000 when the surviving spouse is sole heir — qualify for small-estate administration (Md. Est. & Trusts §5-601). Context: probate cost by state · small-estate limits by state · will vs. trust calculator.

Is Maryland a good state to retire in for taxes?

The honest answer is “it’s complicated, and the county matters”: Social Security is untaxed and a 65+ retiree living on a government or employer pension can shelter most income under the exclusion — but IRA-based retirees get no exclusion, the county layer adds up to 3.3% everywhere, and bequests outside the immediate family face the 10% inheritance tax. Maryland rewards pension retirees with exempt heirs; it is expensive for IRA retirees with nieces and nephews in the will.

Maryland is one of 43 jurisdictions that do not tax Social Security at any income level in 2026. The other 8 exempt benefits only up to an income or age limit. Full rules and statutes: the 51-state table.

Maryland vs. its neighbors

State	Social Security	Pension / 401(k) / IRA	Estate tax	Inheritance tax
Maryland	Not taxed	Pension exclusion up to $40,600 for tax year 2026 at 65+ (not IRAs)	Yes — $5M exemption	Yes — 10% collateral heirs
Pennsylvania	Not taxed	Not taxed (retirement-age distributions)	None	Yes — 0/4.5/12/15% by heir class
Delaware	Not taxed	Exclude up to $12,500/person at 60+	None (repealed 2018)	None
Virginia	Not taxed	Taxable; age deduction up to $12,000 (income-tested)	None (repealed 2007)	None
New Jersey	Not taxed	Exclusion up to $100,000 MFJ at 62+ (income-tested)	None (repealed 2018)	Yes — Class C/D heirs

Comparison rows summarize general rules; see our 51-state retirement tax table for statute-cited detail.

Considering a Roth conversion? The converted amount is taxed as ordinary income in the year you convert, and Maryland may treat it differently from the retirement income above — see how all 51 jurisdictions tax Roth conversions.

Finding a financial advisor in Maryland

Per the SEC’s July 2026 Investment Adviser roster, Maryland has 225 SEC-registered advisory firms (#18 nationally) managing $3.10 trillion (#11 by AUM). Full breakdown: Maryland advisor statistics. Reviewing fee structures before or after a move: fee-drag calculator.

Thinking about moving?

Four taxes change when you move state in retirement, not one: income tax on withdrawals, state estate tax, state inheritance tax, and what probate costs your heirs. Corridor comparisons involving Maryland:

Leaving Maryland? See leaving Maryland in retirement.

Compare any two states with the retirement tax comparison tool, or browse all corridors at the relocation hub.

What probate costs in Maryland

Maryland uses a hybrid standard — a statutory ceiling or floor with reasonableness applied inside it — so the fee has a bound but not a fixed number. Whether its small-estate route of $50,000 reaches real property is not clearly stated in the statute, so treat that as unresolved rather than permission. Full detail with the governing statute, the court filing fee and the threshold: Maryland probate cost. To price a specific estate, use the probate cost calculator.

Cite or share this guide

Suggested citation: Clear Money Guide, “Maryland Retirement Taxes (2026 edition),” statute-cited; clearmoneyguide.com/maryland-retirement-taxes/. Free to cite with attribution and a link. Data verified July 23–24, 2026 against state statutes, session laws, and revenue-department guidance.

Figures verified against Md. Code Tax-General sec. 7-203, 7-204, 7-309, 10-105, 10-106, 10-207 and 10-209, Est. & Trusts sec. 5-601 and 7-601, the Comptroller pension exclusion worksheet and the Register of Wills fee schedule on September 30, 2026; the inheritance-tax credit against estate tax, the neighbor-state comparison rows, the SEC adviser roster figures, the 51-state Social Security counts and the claim that Maryland is the only state with both death taxes were not re-checked.

Maryland Retirement Taxes (2026): The Only State With Both Death Taxes – Plus the County Layer and the IRA Trap

What this state guide covers