Updated October 5, 2026. Quick answer: Yes. Maryland taxes interest and dividends as income on graduated state rates that run from “2% of Maryland taxable income of $1 through $1,000;” up to “6.50% of Maryland taxable income in excess of $1,000,000.” Counties add their own income tax, which these documents do not cover.
How Maryland treats dividends and interest
| Item | What the documents say |
|---|---|
| Treatment | Taxed on the graduated schedule |
| Rates (individuals other than joint filers and heads of household) | 2% from $1 to $1,000, rising through “4.75% of Maryland taxable income of $3,001 through $100,000;” to 6.50% above $1,000,000; the statute page prints no tax year |
| Other states’ bonds | Interest from non-Maryland state or local bonds, including mutual funds that invest in them, is added to income |
| Maryland bonds | Interest on “obligations of Maryland or any Maryland subdivision is exempt from Maryland tax” |
| U.S. obligations | The booklet’s subtraction line reads “Enter interest on U.S. Savings Bonds and other U.S. obligations.” |
| Mutual funds and Ginnie Mae | Only the portion of a fund’s dividends attributable to U.S. Government obligations is subtracted, and the booklet says income from Government National Mortgage Association securities cannot be subtracted |
A $20,000 example
Taxable dividends and interest of $20,000 that land in the $3,001 to $100,000 bracket are taxed at 4.75%, computed as $20,000 x 4.75% = $950, before the county tax.
What changes in 2026
The latest documents read print no 2026 change to the way dividends and interest are taxed.
Federal rules
The state’s treatment sits on top of the federal one. Qualified dividends and ordinary dividends are sorted out on the Form 1099-DIV, as the site explains in Box 1a and 1b: ordinary versus qualified dividends, and interest is reported as covered in 1099-INT Box 1. The IRS explains the federal side in Topic no. 403, Interest Received and Topic no. 404, Dividends.
Related: whether Maryland taxes capital gains, whether Maryland taxes pensions, how Maryland taxes retirement income, dividends and interest tax by state, and how tax-exempt interest is reported.
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Answer againSources
- 2025 Maryland Resident Tax Forms and Instructions booklet: https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/instructions/2025/resident-booklet.pdf
- Md. Code, Tax-General 10-105 (Maryland income tax rates): https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gtg§ion=10-105&enactments=false
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.