Updated October 16, 2026. Quick answer: Maryland’s pension exclusion does not cover IRAs: the Comptroller’s booklet says a traditional IRA, Roth IRA or rollover IRA does not qualify, and the exclusion is written for residents who are 65 or over or totally disabled, or whose spouse is totally disabled, so the documents read give a beneficiary no IRA exclusion.
Maryland at a glance
| Item | What the documents say |
|---|---|
| How the state taxes retirement-account income | Taxed as income; the pension exclusion does not cover IRAs |
| Do the state’s documents address beneficiaries? | Not addressed: the documents read do not mention inherited accounts |
| Retirement exclusion or credit | Maximum $41,200, reduced by Social Security and Railroad Retirement benefits, for residents 65 or over or totally disabled, or whose spouse is totally disabled; employer-plan income only, not IRAs |
| Rate in the documents read | Top rate of 6.50%: over $1,000,000 on the single, separate and dependent schedule, and over $1,200,000 on the joint, head of household and qualifying surviving spouse schedule, plus local tax |
| State inheritance or estate tax | The booklet describes a Maryland estate tax return but does not mention an inheritance tax: see CMG’s Maryland inheritance tax page |
| Changed for 2026? | The 2025 booklet lists changes that began in tax year 2025, including altered State income tax brackets and an additional 2% tax on certain net capital gain income; it does not state what changes for 2026 |
What the Maryland documents say
The 2025 resident booklet says the pension exclusion applies to income from employee retirement systems under sections 401(a), 403 or 457(b), and that a traditional IRA, a Roth IRA and a rollover IRA do not qualify. The maximum allowable exclusion is $41,200.
The statute ties the exclusion to age or disability: “a resident is at least 65 years old or is totally disabled”.
The booklet’s rate schedules print a top rate of 6.50%, on the excess over $1,000,000 for single, separate and dependent filers and over $1,200,000 for joint filers, heads of household and qualifying surviving spouses, and counties and Baltimore City add a local tax. For estates, the booklet says a Maryland estate tax return is required at or above the estate tax exemption, $5,000,000 for decedents dying in 2019 and later.
The federal 10-year rule and your Maryland tax year
IRS Publication 590-B says a beneficiary may be required to take the entire account balance by the “end of the 10th year following the year of the owner’s death”, with exceptions for certain beneficiaries. Because the balance generally has to come out within that window, the timing of each withdrawal decides which tax year it lands in. See the 10-year rule and annual RMDs, lump sum versus spreading withdrawals and inherited IRA rules.
Withholding and other state taxes
Whether a state withholds from a withdrawal is a separate rule: see state withholding on retirement withdrawals. For Maryland’s own death taxes, see Maryland inheritance tax.
What the documents do not say
- The documents read do not mention inherited accounts or beneficiaries of retirement accounts.
- The booklet does not describe a separate deduction for income in respect of a decedent.
- The inheritance tax is not described in the booklet; see CMG’s Maryland inheritance tax page.
Common mistakes
- Assuming Maryland’s rule for your own retirement income also covers an account you inherited: read whether its documents address beneficiaries, and confirm the point with a Maryland preparer.
Related: state tax on inherited IRA withdrawals, state by state, whether Maryland taxes 401(k) and IRA withdrawals, Maryland retirement taxes, Maryland inheritance tax, inherited IRA rules, spouse versus non-spouse beneficiary rules, and state withholding on retirement withdrawals.
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Answer againSources
- 2025 Maryland Resident Income Tax Return Instructions (Resident Booklet, Form 502): https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/instructions/2025/resident-booklet.pdf
- Annotated Code of Maryland, Tax: General, Section 10-209: https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gtg§ion=10-209&enactments=false
- IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs): https://www.irs.gov/pub/irs-pdf/p590b.pdf
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.