Updated October 4, 2026. Quick answer: Partly. Maryland lets a retiree subtract “the first $20,000 of military retirement income received by an individual” at 55 or older, and the first $12,500 under 55, on the last day of the tax year.
Next door, the District of Columbia’s treatment of military retired pay: does District of Columbia tax military retirement.
How Maryland treats military retired pay
| Item | What the documents say |
|---|---|
| Treatment | Subtraction (code letter u) from Maryland income; the remainder is taxed |
| Age 55 or older | Up to $20,000 of military retirement income |
| Under 55 | Up to $12,500 |
| What counts | Retirement income, including death benefits, received as a result of military service |
| Rates | 2025 schedules run from 2.00% up to 6.50%; county income tax is separate |
A $30,000 example
Age 60, $30,000 of retired pay: $30,000 minus $20,000 = $10,000 is left in Maryland income.
Age 50: $30,000 minus $12,500 = $17,500 is left.
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What changes in 2026
No 2026 change is printed in the documents read. The 2025 booklet and the statute page both print the $12,500 and $20,000 caps.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Publication 3, Armed Forces’ Tax Guide.
Related: whether Maryland taxes pensions, how Maryland taxes retirement income, military retirement pay by state, and the military retirement calculator.
Sources
- 2025 State & Local Tax Forms & Instructions (Instruction 13, code u): https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/instructions/2025/resident-booklet.pdf
- Tax-General Section 10-207 (subtraction modifications), Annotated Code of Maryland: https://mgaleg.maryland.gov/mgawebsite/Laws/StatuteText?article=gtg§ion=10-207&enactments=false
Sources: the primary documents linked above, read on October 4, 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.