Maryland imposes a tax on the transfer of a deceased person’s assets, which is separate from the federal estate tax. This tax is levied on the decedent’s estate before assets are distributed to any heirs. The framework involves specific exemption amounts, tax rate calculations, and filing procedures that are unique to the state.
Maryland Estate Tax Exemption Amount
Maryland allows a specific amount of an estate’s value to be transferred without incurring a state estate tax. For 2025, this exemption amount is $5 million. If the total value of an estate is less than this $5 million threshold, it will not be subject to Maryland’s estate tax. This exemption is a fixed amount and, unlike the federal exemption, is not indexed for inflation.
The value of the exemption will remain at $5 million unless the Maryland General Assembly enacts new legislation. For married couples, Maryland law allows for “portability,” which means a surviving spouse may use the deceased spouse’s unused portion of the $5 million exemption. This allows a married couple to shield up to $10 million from the state estate tax, provided the proper elections are made.1Justia. Maryland Tax – General Code Section 7-309 – Effect of Change in Federal Estate Tax Law
Calculating Maryland Estate Tax Liability
The Maryland estate tax is imposed on the portion of the estate that exceeds the $5 million exemption. The tax is calculated using a progressive rate structure, with a maximum rate of 16 percent.
For example, if an estate is valued at $8 million, it exceeds the exemption by $3 million, and the tax would be calculated on this portion. The calculation is not a simple flat 16 percent; instead, it follows a graduated scale where rates increase in brackets. Any Maryland inheritance tax paid by beneficiaries can be credited against the total Maryland estate tax owed, preventing a form of double taxation at the state level.
Determining Your Maryland Gross Estate
To determine if an estate is subject to the tax, one must first calculate the value of the Maryland gross estate. This includes all property the decedent owned or had an interest in at the time of death.2Justia. Maryland Tax – General Code Section 7-301 – Definitions Common assets that are part of this calculation include real estate located in Maryland, bank accounts, stocks, bonds, vehicles, business interests, and valuable personal property. These assets are valued at their fair market value on the date of the decedent’s death.
The gross estate for Maryland tax purposes includes both probate assets and non-probate assets, like jointly owned property or accounts with beneficiary designations. For Maryland residents, this calculation includes real and tangible personal property located outside of Maryland. For non-residents, only the value of their real and tangible personal property located within Maryland is subject to the tax.
Understanding Maryland Inheritance Tax
Maryland is the only state to impose both an estate tax and an inheritance tax. The inheritance tax is different from the estate tax. While the estate tax is paid by the estate itself based on its total value, the inheritance tax is paid by the beneficiary. The amount of inheritance tax due depends on the beneficiary’s relationship to the deceased person.
Close relatives are completely exempt from the inheritance tax. This exempt group includes:
- A surviving spouse
- Children and stepchildren
- Grandchildren
- Parents
- Grandparents
- Siblings
3Justia. Maryland Tax – General Code Section 7-203 – Exemptions
However, for more distant relatives, such as nieces and nephews, or for non-relatives, a flat 10 percent inheritance tax is levied on the value of the property they receive. An estate could be subject to both taxes, only one, or neither, depending on its value and beneficiaries.
Maryland Estate Tax Return Filing and Payment
The personal representative of the estate is responsible for filing the Maryland estate tax return, Form MET-1. A completed federal estate tax return, IRS Form 706, must be attached to the Maryland return, even if the estate is not large enough to owe federal tax.
The deadline for filing the MET-1 and paying any tax due is nine months after the decedent’s date of death.4Justia. Maryland Tax – General Code Section 7-305 – Tax Return A six-month extension to file the return can be requested by submitting Form MET-1E to the Comptroller on or before the original due date. The completed tax return and any payment must be sent to the Comptroller of Maryland.