See federal withholding, FICA, the graduated Maryland state tax after your MW507 exemptions, and your county tax on the same base for any pay frequency.
Maryland payroll taxes stack federal taxes with a graduated state tax and a county tax that every jurisdiction levies. Every Maryland paycheck has federal Social Security (6.2%), Medicare (1.45%), federal income tax withholding, Maryland income tax withheld on a graduated schedule (4.75% up to 6.50% under House Bill 352) after the flat $3,400 standard deduction and MW507 exemptions, and a county income tax withheld on that same base at the employee's county-of-residence rate. All 24 jurisdictions tax income, from 2.25% in Worcester County to 3.30% in Dorchester and Kent. Maryland has no employee-paid unemployment contribution; employers separately pay on the first $8,500 of each worker's wages.
- Maryland income tax is graduated. The 2026 withholding schedule runs 4.75% up to $100,000 of taxable income (single) or $150,000 (joint), then 5.00%, 5.25%, 5.50%, 5.75%, 6.25%, and a top rate of 6.50% under House Bill 352.
- Withholding uses a flat standard deduction, $3,400 for 2026 (it was $3,350 for 2025), plus $3,200 per MW507 exemption. HB 352 replaced the old sliding 15%-of-income deduction.
- The county tax is the defining Maryland feature: all 24 jurisdictions levy one, on the same wages as the state tax after the same deductions. Rates run 2.25% (Worcester) to 3.30% (Dorchester and Kent); Montgomery and many others are 3.20%.
- Anne Arundel and Frederick are the only two graduated county taxes; the rest are flat.
- Because the county rides on the state base, a pre-tax 401(k) deferral lowers both Maryland lines. A $7,800 deferral in a 3.20% county saves about $620 a year.
- Maryland has no employee-paid unemployment tax. Unemployment insurance is funded entirely by employers on the first $8,500 of wages.
- A nonresident who works in Maryland pays a special 2.25% rate in place of the county tax. Maryland has reciprocity with Virginia, DC, Pennsylvania, and West Virginia.
What Makes Maryland Payroll Different
Federal payroll tax is the same in every state. What changes from one state to the next is the second layer: state income tax withholding, employer unemployment taxes, and any local wage taxes. Maryland sits at the more involved end because it combines a graduated state tax with a universal county tax that reaches every worker.
Maryland's state tax is graduated, running from 4.75% to 6.50% under House Bill 352, applied after a flat standard deduction and MW507 exemptions. What sets Maryland apart is that the local income tax is universal: every one of the 24 jurisdictions levies its own income tax, and unlike a Michigan city tax that only some workers pay, a Maryland county tax appears on every resident's paycheck. The county tax is withheld on the same reduced base as the state tax, so both Maryland lines move together. The federal baseline behind all of this is explained in the how payroll taxes work guide.
Employee Withholding Overview in Maryland
A Maryland employee sees federal taxes, a graduated state tax, and a county tax. There is no employee unemployment line and no state disability line. The deductions fall into three groups: federal taxes, Maryland state income tax, and the county income tax.
| Deduction | Who Pays | Rate (2026) | Wage Cap |
|---|---|---|---|
| Social Security (federal) | Employee + Employer | 6.2% | $184,500 |
| Medicare (federal) | Employee + Employer | 1.45% | None |
| Additional Medicare (federal) | Employee only | 0.9% | Wages over $200K ($250K MFJ) |
| Federal income tax withholding | Employee only | Varies (W-4) | None |
| Maryland state income tax | Employee only | 4.75%–6.50% | None (after deduction/exemptions) |
| Maryland county income tax | Employee only | 2.25% to 3.30% | None (same base as state) |
| Employee unemployment | Nobody | None | — |
The federal lines work identically to any other state. For Social Security, the 2026 wage base is $184,500, after which Social Security stops for the year. Medicare has no cap. What is unique to Maryland is that the state line is graduated and the county line, though usually flat, depends entirely on the county you live in, and there is no employee unemployment contribution at all.
How Is Maryland State Income Tax Withheld?
Maryland uses the graduated percentage method in the Comptroller of Maryland's Employer Withholding Guide. The employer annualizes wages, subtracts the flat standard deduction and the MW507 exemptions, then applies the state rate schedule and, on the same remainder, the county rate. House Bill 352 (2025) reshaped the schedule, adding two new high-earner brackets and raising the top rate from 5.75% to 6.50%.
| Taxable income (single) | Taxable income (joint) | Rate |
|---|---|---|
| Up to $100,000 | Up to $150,000 | 4.75% |
| $100,000–$125,000 | $150,000–$175,000 | 5.00% |
| $125,000–$150,000 | $175,000–$225,000 | 5.25% |
| $150,000–$250,000 | $225,000–$300,000 | 5.50% |
| $250,000–$500,000 | $300,000–$600,000 | 5.75% |
| $500,000–$1,000,000 | $600,000–$1,200,000 | 6.25% |
| Over $1,000,000 | Over $1,200,000 | 6.50% |
Maryland maps Single and Married Filing Separately to its Single schedule, and Married Filing Jointly, Head of Household, and Qualified Surviving Spouse to its Joint schedule. The federal Form W-4 sets federal withholding, covered in the W-4 withholding explained guide, while Form MW507 sets the Maryland exemption count. Supplemental wages such as bonuses are withheld at a flat rate that combines the top state rate and the county rate.
Maryland Withholding Deductions (Form MW507)
Form MW507 is Maryland's version of the federal W-4, and it is the lever an employee has over state and county withholding. It sets the marital status used for the rate schedule and the number of exemptions.
Standard Deduction and Exemptions
Under House Bill 352, the standard deduction is a flat annual amount, no longer a sliding percentage of income:
| Reduction | Amount | Notes |
|---|---|---|
| Standard deduction (2026) | $3,400 | Flat, same for single and married ($3,350 for 2025) |
| Per MW507 exemption | $3,200 | Yourself, spouse, and dependents |
The employer prorates both amounts to the pay period and subtracts them before applying the state schedule and the county rate. There is no additional Maryland allowance beyond these. If you do not file a Form MW507, the employer withholds as single with zero exemptions, which produces the highest withholding. To see how a given exemption count and county change take-home pay, use the Maryland paycheck calculator, which applies the standard deduction, your exemptions, and your county rate directly.
Maryland County Income Taxes
This is the layer that defines Maryland payroll. Unlike Michigan, where only about two dozen cities levy a local income tax, all 24 Maryland jurisdictions levy one, so every Maryland resident pays a county tax on top of the state tax. The county tax is withheld on the same reduced base as the state tax, so there is no separate county allowance.
| Jurisdiction | 2026 rate |
|---|---|
| Worcester — lowest | 2.25% |
| Talbot | 2.40% |
| Garrett | 2.65% |
| Cecil | 2.74% |
| Washington | 2.95% |
| Carroll, Charles | 3.03% |
| Harford | 3.06% |
| Montgomery, Baltimore City, Baltimore County, Prince George's, Howard, Allegany | 3.20% |
| Dorchester, Kent — highest | 3.30% |
| Anne Arundel (graduated) | 2.70%–3.20% |
| Frederick (graduated) | 2.25%–3.20% |
The rate you pay is fixed by where you live, not where you work. For 2026, Allegany rose to 3.20% and Kent rose to 3.30% from the prior year. Anne Arundel and Frederick are the only two graduated county taxes: Anne Arundel uses a marginal schedule (2.70%, 2.94%, then 3.20%), and Frederick uses a fixed rate that steps by income band. Because the full list of 24 jurisdictions can change from year to year, the Maryland paycheck calculator carries every rate and computes the two graduated counties automatically.
Nonresidents and the Special 2.25% Rate
A worker who lives outside Maryland but earns Maryland wages does not pay a county tax, because the county tax is residence-based. Instead Maryland applies a special nonresident tax rate of 2.25% in place of the local tax, added to the graduated state rate. This keeps a nonresident from escaping the local layer entirely while not tying them to a county they do not live in.
Maryland has reciprocity with Virginia, Washington DC, Pennsylvania, and West Virginia. A resident of one of those jurisdictions who works in Maryland can file the reciprocity form so the employer withholds no Maryland state income tax, and the worker pays their home jurisdiction instead. Reciprocity is a state-tax arrangement, so the special nonresident rate does not apply to reciprocity residents who file correctly.
Employer Payroll Obligations in Maryland
Maryland employers carry the federal employer taxes plus State Unemployment Insurance through the Division of Unemployment Insurance. The federal side, covered in the employer payroll tax obligations guide, includes the matching 6.2% Social Security and 1.45% Medicare plus Federal Unemployment Tax (FUTA). On top of that, Maryland adds the employer unemployment contribution. There is no employee unemployment contribution to withhold. Employers remit the withheld state and county income tax together to the Comptroller of Maryland.
| Employer tax | Basis | Wage base |
|---|---|---|
| State Unemployment Insurance | Experience-rated | $8,500 per employee |
| SUI, new employer | Standard new-employer rate | $8,500 per employee |
| FUTA (federal, after state credit) | 0.6% | $7,000 per employee |
The Maryland unemployment taxable wage base is $8,500 per employee, so the employer unemployment tax stops once an employee's year-to-date wages pass $8,500. New employers pay a standard entry rate before moving to an experience-rated rate; these are employer costs and are never deducted from employee pay. The combined cost-to-hire can be modeled with the employer payroll tax calculator.
Maryland Has No Employee Unemployment Deduction
A handful of states, including Pennsylvania and New Jersey, take a small unemployment contribution directly from employee wages. Maryland is not one of them. The entire cost of Maryland unemployment insurance falls on employers through the Division of Unemployment Insurance, so there is no employee unemployment line on a Maryland pay stub at all.
This matters most for workers who move to Maryland from a state that does deduct employee unemployment and expect to see the same line. In Maryland that line simply does not exist, and its absence is correct, not a payroll error. Maryland also has no state-run disability insurance deduction, and the Family and Medical Leave Insurance (FAMLI) program's payroll contributions have not yet begun, so the mandatory deductions on a Maryland stub are federal taxes, the graduated state income tax, and the county income tax.
Maryland Supplemental Wage Withholding
Supplemental wages are payments outside regular salary: bonuses, commissions, overtime, sales awards, and back pay. Maryland withholds these at a flat combined rate rather than running them through the graduated schedule.
- Maryland state income tax on supplemental wages: withheld at the top state rate of 6.50% for a lump-sum bonus, per the Comptroller's guidance.
- County income tax: the highest local rate for the county of residence applies to the supplemental payment.
- Employee unemployment: none, on supplemental wages or regular wages.
Federal income tax withholding on supplemental wages is a separate calculation set by the IRS, and Social Security and Medicare still apply under their own rules. For the federal supplemental math, use the Bonus Tax Calculator.
Maryland Filing and Payment Frequency
Maryland employers report and remit withheld state and county income tax together using Form MW506 on an accelerated, monthly, quarterly, seasonal, or annual schedule based on the amount withheld, and reconcile annually on Form MW508 with the W-2 information. Because the county tax is remitted together with the state tax on the same return, Maryland requires the combined state and local tax to be reported as one amount on the year-end W-2. The federal deposit schedule is covered separately in the payroll tax deadlines guide.
Unemployment tax is reported and paid separately from income tax withholding, on a quarterly basis through the Division of Unemployment Insurance. New employees must be reported to the Maryland State Directory of New Hires within 20 days of the hire date.
How Take-Home Pay Works in Maryland
The calculation sequence runs from gross pay down to net pay. Because Maryland income tax begins with federal adjusted gross income and the county tax shares the state base, the same pre-tax deductions that reduce federal wages also reduce both Maryland lines before the standard deduction and MW507 exemptions are applied.
- Start with gross wages for the pay period.
- Subtract federal pre-tax deductions (401(k), Section 125 health premiums) to find taxable wages for federal and both Maryland taxes.
- Apply federal income tax withholding using the Form W-4 and IRS Publication 15-T.
- Subtract the per-period share of the $3,400 standard deduction and the MW507 exemptions ($3,200 each), then apply the graduated state schedule and the county rate to the same remainder.
- Subtract Social Security (6.2%) and Medicare (1.45%) on FICA wages (gross less Section 125 medical). The remainder is net pay; there is no employee unemployment line.
To see exact figures for a specific salary, exemption count, county, and pay frequency, use the Maryland paycheck calculator or the general take-home pay calculator for a full pre-tax benefits stack.
Maryland Payroll Quick Facts (2026)
| Income tax rate (2026) | Graduated 4.75%–6.50% |
| Top rate | 6.50% (HB 352) |
| Withholding method | Graduated percentage method |
| State withholding form | Form MW507 |
| Standard deduction (2026) | $3,400 flat |
| MW507 exemption | $3,200 each |
| County income tax | All 24 jurisdictions; 2.25% to 3.30% |
| County base | Same as state (residence) |
| Graduated counties | Anne Arundel, Frederick |
| Nonresident rate | 2.25% special |
| Employee unemployment | None |
| UI wage base (employer) | $8,500 per employee |
| Reciprocity | VA, DC, PA, WV |
| Agencies | Comptroller of Maryland, Dept. of Labor |
At LMN Tax Inc, the Maryland item that surprises new residents is that the county tax is not a small add-on. In a 3.20% county like Montgomery or Baltimore City, the local piece is nearly as large as the state piece on a middle income, because the state schedule sits at 4.75% for most workers while the county adds another 3.20% on the identical base, so a Maryland worker in a top county effectively pays close to 8% state-plus-local on wages. The second recurring issue is the shared base: because the state and county tax come off the same standard-deduction-and-exemption-reduced wages, a client who raises their 401(k) sees both Maryland lines fall, not just the state line. The third is the House Bill 352 change. Payroll systems that were not updated for 2025 and 2026 can still be using the old sliding standard deduction or the old 5.75% top rate, so we check high earners' stubs against the new 6.25% and 6.50% brackets and the flat standard deduction, which is $3,400 for 2026. For most workers the flat deduction is close to the old one, but for a two-earner household the gap between the withholding tables and the actual return can be a few hundred dollars.
Real-World Example: A Montgomery County Biweekly Paycheck
Devin earns $65,000 per year and works in Rockville. He is paid biweekly (26 pay periods), files Single on his W-4, claims one exemption on Form MW507, and lives in Montgomery County, so he owes the 3.20% county tax, with no pre-tax contributions. The federal figure below follows the 2025 Publication 15-T method, and the Maryland lines use the 2025 withholding basis (the $3,350 standard deduction) shown in the calculator; for 2026 the standard deduction is $3,400, which changes the Maryland lines by only a few cents.
Gross pay per period: $65,000 / 26 = $2,500.00
| Line | Amount |
|---|---|
| Gross wages | $2,500.00 |
| Federal income tax withholding | −$227.46 |
| Social Security (6.2%) | −$155.00 |
| Medicare (1.45%) | −$36.25 |
| Maryland income tax (4.75%, standard deduction + one exemption) | −$106.78 |
| Montgomery County tax (3.20%) | −$71.94 |
| Net pay | $1,902.57 |
The Maryland state line of $106.78 comes from ($65,000 − $3,350 − $3,200) × 4.75% ÷ 26, and the Montgomery County line of $71.94 is that same $58,450 base × 3.20% ÷ 26, both from one figure. Devin's combined Maryland rate is about 7.1% of gross. A worker in low-rate Worcester County (2.25%) would pay only about $50.60 of county tax on the same salary, while a resident of no-income-tax Texas or Florida would have neither the state nor the county line. Devin's employer separately pays its matching Social Security and Medicare, plus Maryland unemployment tax on the first $8,500 of his wages. Run your own numbers with the Maryland paycheck calculator, which applies the graduated state schedule after your standard deduction and exemptions, adds your county line on the same base, and correctly lets a traditional 401(k) deferral reduce both Maryland lines.
When Maryland Withholding Logic Does Not Apply
- Wrong county on file: The county tax is only as accurate as the county of residence keyed from your MW507. If it is wrong, or you moved and did not update it, the county line will be off. The controlling county is where you live.
- Nonresidents and reciprocity: A worker who lives outside Maryland pays the special 2.25% nonresident rate instead of a county tax; a Virginia, DC, Pennsylvania, or West Virginia resident can file for reciprocity and have no Maryland state tax withheld.
- Anne Arundel and Frederick: These two use graduated local schedules, so a single flat county rate does not describe them; the calculator applies their schedules automatically.
- Very low earners with exemptions: Once the $3,400 standard deduction and MW507 exemptions exceed annual wages, both the Maryland state and county lines are zero, and annualized gross under $5,000 is exempt from Maryland withholding.
- Self-employed and 1099 workers: Independent contractors are not subject to Maryland withholding. They handle Maryland income tax through estimated payments, similar to the federal process in the self-employment tax guide.
- Roth and post-tax elections: A Roth 401(k) deferral does not reduce the Maryland base, because it does not reduce federal wages either; only traditional pre-tax deferrals lower the Maryland lines.
Frequently Asked Questions
If you are a Maryland employee, use the Maryland paycheck calculator to see federal withholding, FICA, the graduated state tax, and your county tax for your salary, MW507 exemptions, county, and pay frequency, then confirm the exemption count and the county on your stub are correct.
If you are a Maryland employer, confirm your Comptroller withholding and Division of Unemployment Insurance accounts and your annual experience rate, verify the 2026 graduated schedule, the $3,400 standard deduction, and each employee's county rate are set, then model your full cost-to-hire with the employer payroll tax calculator and review the employer payroll tax obligations guide for federal deposit and filing duties.
- Comptroller of Maryland: Employer Withholding Guide (graduated state schedule; $3,400 standard deduction for 2026; $3,200 exemption; all 24 county rates; Anne Arundel and Frederick graduated schedules; special 2.25% nonresident rate; MW506/MW508 filing)
- USDA National Finance Center: Bulletin NFC-26-1772552688 (2026 Maryland county rate changes: Allegany 3.03% to 3.20%, Kent 3.20% to 3.30%)
- USDA National Finance Center: Bulletin NFC-25-1756838508 (HB 352 changes: flat standard deduction, two new brackets, top rate 5.75% to 6.50%; full state and county withholding formula)
- Maryland Department of Labor: Division of Unemployment Insurance ($8,500 wage base; employer-funded)
- IRS Publication 15 (Employer's Tax Guide)
- IRS Topic 751: Social Security and Medicare Withholding Rates