Updated October 5, 2026. Quick answer: Yes. Maryland taxes the income of a trust that is not distributed, with the 2025 top rate at 6.50%, and the Comptroller says “any income distributed by the fiduciary of the trust or estate” is not taxable to the trust or estate during the tax year.
How Maryland treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Maryland taxes the undistributed income of trusts and estates through Form 504, and the booklet says “Maryland follows federal income tax treatment for fiduciaries” of trusts and estates. |
| Who counts as a resident trust | The booklet lists four tests for a non-estate fiduciary, covering a Maryland decedent’s will, a Maryland grantor and Maryland administration. The source says: “Fiduciaries other than personal representatives are considered residents of Maryland if:” the trust was created by the will of a Maryland decedent, holds property transferred by that will, has a current Maryland resident as creator or grantor, or is principally administered in Maryland. |
| Rate on trust income | Fiduciaries use the single-filer schedule, which starts at 2.00% and reaches 6.50% for 2025. The source says: “The top state income tax rate for resident fiduciaries is 6.50 percent” for tax year 2025. |
| Distribution deduction | The booklet describes the rule by reference to federal law, and it states that income distributed in the year is taxed to the beneficiary rather than the trust. The source says: “any income distributed by the fiduciary of the trust or estate” during the tax year is not taxable to the trust or estate. |
| Nonresident trusts | A nonresident fiduciary owes tax only on Maryland source income and also faces a special nonresident tax of 2.25% on Form 504NR. The source says: “A nonresident fiduciary is taxable only on income from sources” within Maryland. |
| Special nonresident tax | The booklet computes the extra nonresident tax on Form 504NR with a flat percentage. The source says: “Multiply the taxable net income on line 17e by 2.25%” to calculate the Special Nonresident tax. |
| Return to file | Resident and nonresident fiduciaries both file Maryland Form 504, and nonresidents attach Form 504NR. The source says: “Form 504 is used by both resident and nonresident” fiduciaries. |
| Additional capital gains tax | The 2025 booklet lists a new additional tax on certain net capital gain income, handled on Form 504CG. The source says: “Additional 2% Tax on Net Capital Gain Income and Form 504CG” is listed among the 2025 changes. |
A $10,000 example
The tax on $10,000 of taxable income a trust keeps depends on the bracket it lands in. Taxed wholly at the lowest printed rate, 2.00%, the tax is computed as $10,000 x 2.00% = $200; taxed wholly at the highest, 6.50%, it is computed as $10,000 x 6.50% = $650. The state’s own schedule decides which applies. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The latest documents read print no 2026 change to how trust income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Maryland taxes retirement income, whether Maryland taxes pensions, what a living trust costs in Maryland, and federal trust tax brackets.
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Answer againSources
- 2025 Fiduciary Tax Return Instructions, Form 504 (Comptroller of Maryland): https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/instructions/2025/fiduciary-booklet.pdf
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.