Maryland Business Taxes at a Glance
Maryland taxes income at both the state and local level, and its 2025 legislative session changed several rules at once: new top income tax brackets, a surtax on capital gains for higher-income residents, and a new sales tax on technology services. Maryland also taxes digital advertising revenue and requires every business entity to file an annual report. BOMCAS helps Maryland individuals and businesses understand and file under these rules.
State and Local Income Tax
Maryland taxes residents' income at graduated state rates, and each county and Baltimore City adds a local income tax on residents, collected on the same state return. Nonresidents who earn Maryland income pay a special nonresident tax in place of the local tax.
Beginning with tax year 2025, Maryland added higher state brackets for larger incomes and changed standard and itemized deductions. Counties also gained the ability to set local rates within a wider range. Many taxpayers' Maryland tax changed even without a change in income. We prepare returns under the new rules and update estimated payments.
Capital Gains Surtax
Starting in 2025, Maryland imposes an additional 2% tax on net capital gains for individuals with federal adjusted gross income above $350,000, with some exclusions, such as for certain sales of a primary residence and gains in retirement accounts. The Comptroller has issued detailed guidance on how it applies. Owners selling a business, investors with large gains, and people selling real estate should consider this tax before the sale. We review transactions and plan with you.
Commuters and Reciprocity
Maryland has reciprocal agreements with the District of Columbia, Pennsylvania, Virginia, and West Virginia for wages, so Maryland residents working in those places generally pay tax to Maryland on wages, and vice versa, if they file the exemption form. Delaware is not part of these agreements. We prepare returns for commuters and help employers withhold for the right jurisdiction.
Sales Tax on Data, IT, and Software Services
Maryland's sales and use tax applies to tangible goods and a list of services. Since July 1, 2025, a 3% sales tax applies to certain data and information technology services and software publishing services, identified by industry codes. Previously untaxed technology providers may now need to collect it. Businesses buying these services for resale or for use outside Maryland need to know the exemptions.
We help technology firms decide whether their services fall under the new tax, register, update invoices, and file returns.
Digital Advertising Gross Revenues Tax
Maryland also taxes the gross revenues of large companies from digital advertising services in the state, with tax rates based on global annual gross revenues. The tax has been the subject of litigation, so affected companies should follow the Comptroller's guidance closely. Our role is limited to accounting support and records for companies subject to it.
Annual Report and Personal Property Return
Every business entity registered in Maryland, including corporations, LLCs, and partnerships, files an annual report with the State Department of Assessments and Taxation (SDAT). Businesses that own or lease personal property in Maryland also file a personal property return as part of it. Local governments set personal property tax rates, and missing the filing can lead to forfeiture of an entity's right to operate.
We prepare the annual report and personal property return from your fixed asset records.
Corporate and Pass-Through Taxes
Maryland taxes the apportioned share of income earned by corporations doing business in the state. Partnerships and S corporations file Maryland returns, pay tax on behalf of nonresident owners, and may elect to pay tax at the entity level for all owners. We prepare entity returns and evaluate the election.
Estate and Inheritance Taxes
Maryland is the only state with both an estate tax and an inheritance tax. The estate tax applies to estates above a state exemption amount, while the inheritance tax applies to certain beneficiaries, with close relatives generally exempt. Executors may need to address both. We help with estate accounting and the decedent's final returns, working with estate counsel.
Payroll and Local Withholding by County
Maryland payroll includes state and local income tax withholding, based on each employee's county of residence, and unemployment insurance reporting to the Maryland Department of Labor. Maryland has enacted a paid family and medical leave program, but its start dates have been delayed, so employers should follow the Department of Labor's current schedule. We run payroll, file quarterly reports, and monitor program changes.
Contractors, Tech Firms, Life Sciences, and Real Estate
- Federal contracting: indirect cost accounting, timekeeping, and multistate payroll
- Technology: the new tax on IT services and multistate apportionment
- Health care and life sciences: practice and research accounting
- Real estate: transfer and recordation taxes and the capital gains surtax
Bookkeeping for Maryland Requirements
Maryland books should track technology service revenue separately for sales tax, employees' counties for local withholding, and personal property for the annual report. We set up the chart of accounts and monthly close to provide these figures.
Contacting BOMCAS About Maryland
Technology firms reviewing the new tax on IT services, investors planning around the capital gains surtax, and businesses filing the SDAT annual report can contact BOMCAS for a remote review. City-level pages for Maryland, organized by service, will be published under this section. The BOMCAS home page and our United States services describe the rest of our work. This page is general and not advice for your specific situation.
Talk to BOMCAS About Your Maryland Taxes
Have a question about your Maryland filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.