Maryland Tax Law
Paying taxes is one of the most important responsibilities you’ll have as a Maryland resident. As a taxpayer, you’re contributing to the welfare of the state and your community. However, it can be confusing when figuring out which taxes you are required to pay and how much you must pay. There are plenty of tax rules, exceptions and benefits to lose yourself in that you could end up paying more than necessary.
Whether you live in Baltimore, Silver Spring or Rockville, you’ll need to account for the various state and federal taxes in your budget, including everyday sales and gasoline taxes. It can be easy to get lost in all of the taxes you’ll owe, so use the information in LawInfo’s Maryland tax law articles to become familiar with them and to avoid penalties.
Maryland Progressive Income Taxes
Maryland taxpayers must pay taxes on their income, including wages, salaries, bonuses, commissions, fees, back pay and vacation pay. Unlike some states that charge a flat income tax percentage, Maryland uses a progressive income tax system.
Under this system, your taxable income amount classifies you under one of eight income brackets. As your income amount goes up, so does your tax rate. For taxpayers with an income above $1,000, your tax rate will be a flat dollar amount plus a percentage of the excess over your bracket’s minimum income limit.
For example, if you had a taxable income of $35,000 in 2016, you’d place in the fourth bracket ($3,000 to $100,000). To calculate your income tax, you would:
- Subtract $3,000 from $35,000 to get $32,000.
- Multiply $32,000 by your bracket’s percentage rate, 4.75 percent (0.0475) to get $1,520.
- Add the flat tax dollar amount of $90 to $1,520 to get $1,610, your total income tax due.
The final amount of income tax you pay may be more or less than your progressive rate depending on your filing status (i.e. individually or jointly filing with a spouse) and any exemptions or credits you may claim, such as dependents.
Maryland Employer Tax Withholding
A Maryland employer who hires a worker in a non-contract position (i.e. a direct hire) is typically responsible for withholding portions of their employee’s income to pay for income taxes. The Maryland Comptroller publishes withholding tax tables every year as a guide for employers on how much they should withhold.
The amount of income an employer must withhold is based on how much the employee earns, their payment schedule (e.g. daily, weekly, monthly, etc.), and the number of dependents the employee can claim. When Tax Day arrives, the employee may either be owed a refund for overpaying their income tax or owe the state or federal government more taxes for underpaying.
Maryland Sales and Use Taxes
In Maryland, the sale, lease or rental of most goods and select services are levied by a sales and use tax at a rate of six percent. The use tax is applied to goods that are used in Maryland but were purchased without paying the state sales tax. Internet and phone orders from out-of-state sellers or vendors are typically subject to the state use tax.
The six percent sales and use tax rate is the same for every county and city.
Maryland Sin Taxes
“Sin” taxes are levied on consumer products like alcohol and tobacco wherever these things are legalized. They act as additional sales taxes (a.k.a. excise taxes) for products or services that are culturally perceived as vices. Sin taxes are meant to dissuade consumers from purchasing or using the taxed products or services without making them illegal.
In Maryland, the following sin taxes are collected:
- $2/pack of 11 to 20 cigarettes.
- $0.10/cigarette for packs of more than 20 cigarettes.
- 70 percent of the wholesale price of cigars.
- 15 percent of the wholesale price of premium cigars.
- 30 percent of the wholesale price of other tobacco products.
- 9 percent of the sales price for alcohol.