The Maryland estate tax applies to estates worth more than $4 million. If you live in Maryland and are thinking about estate planning, this guide will walk you through what you need to know about the Maryland estate tax. If you think you’ll need help with planning, consider working with a financial advisor. SmartAsset’s financial advisor matching service can help you find one that’s a good fit for you.
Maryland Estate Tax Exemption
The estate tax threshold for Maryland is $4 million in 2018. This means that if you die and your total estate is worth less than $4 million, the estate owes nothing at all to the state of Maryland. If your estate is worth more than $4 million, though, there is a progressive tax rate for all wealth above that $4 million mark that your estate will have to pay before money can be dispersed to your heirs.
In 2019, the Maryland estate tax threshold will increase to the same as the federal estate tax exemption. As of 2018, the federal estate tax exemption is $11.18 million and is expected to rise slightly in 2019 with inflation.
Maryland Estate Tax Rate
The estate tax rate for Maryland is graduated. In order to determine your Maryland estate tax burden, start by finding your taxable estate bracket on the chart below. The second column shows what the estate owes on money that falls below your bracket. Then figure out how much of your estate falls above the lower limit of your bracket. Multiply that number by the marginal rate, add it to the base rate and you’ll know the estate tax burden.
Here’s an example: Let’s say your total estate is worth $5.5 million. Subtracting the $4 million exemption, leaves a taxable estate of $1.5 million. Next, find where that number falls on the chart. The base taxes paid for the bracket is $38,800. The bottom of the threshold is $1.04 million, so we subtract that from $1.5 million and get $460,000. That figure multiplied by the marginal rate of 6.4% is $29,440. When we add that number to the base taxes paid, we get a total Maryland estate tax of $68,240 on a $5.5 million estate.
Note: The chart below shows no taxes owed on the first $40,000 of taxable income because of a system of tax credits from the state.
|MARYLAND ESTATE TAX RATES|
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$0 – $40,000||$0||0%||$0|
|$40,000 – $90,000||$0||0.8%||$40,000|
|$90,000 – $140,000||$400||1.6%||$90,000|
|$140,000 – $240,000||$1,200||2.4%||$140,000|
|$240,000 – $440,000||$3,600||3.2%||$240,000|
|$440,000 – $640,000||$10,000||4.0%||$440,000|
|$640,000 – $840,000||$18,000||4.8%||$6400,000|
|$840,000 – $1.04 million||$27,600||5.6%||$840,000|
|$1.04 million – $1.54 million||$38,800||6.4%||$1.04 million|
|$1.54 million – $2.04 million||$70,800||7.2%||$1.54 million|
|$2.04 million – $2.54 million||$106,800||8%||$2.04 million|
|$2.54 million – $3.04 million||$146,800||8.8%||$2.54 million|
|$3.04 million – $3.54 million||$190,800||9.6%||$3.04 million|
|$3.54 million – $4.04 million||$238,800||10.4%||$3.54 million|
|$4.04 million – $5.04 million||$290,800||11.2%||$4.04 million|
|$5.04 million – $6.04 million||$402,800||12%||$5.04 million|
|$6.04 million – $7.04 million||$522,800||12.8%||$6.04 million|
|$7.04 million – $8.04 million||$650,800||13.6%||$7.04 million|
|$8.04 million – $9.04 million||$786,800||14.4%||$8.04 million|
|$9.04 million – $10.04 million||$903,800||15.2%||$9.04 million|
|$10.04 million and up||$1,082,800||16%||$10.04 million|
*The taxable estate is the total above the exemption of $4 million.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.
What Is the Estate Tax?
The estate tax is a tax some states and the federal government levy on the estates of wealthy people after they die but before the money is given to their heirs. It is sometimes called the “death tax.”
Don’t confuse the estate tax with the inheritance tax, which is a separate tax some states levy on recipients of an inheritance after it has been passed on.
Maryland Inheritance Tax
Maryland also has an inheritance tax. If the inheritor is the deceased’s child or direct descendent, the spouse of a child or direct descendent, a spouse, parent, grandparent, sibling, stepchild or stepparent, the inheritance tax does not apply. If money is left to anyone else, including siblings, there is a 10% Maryland inheritance tax.
Maryland Gift Tax
Maryland does not have a gift tax. The federal gift tax applies on gifts of more than $14,000 in 2017 and more than $15,000 in 2018.
Maryland Estate Tax for Married Couples
Right now, the Maryland estate tax is not portable, meaning that when both members of a married couple die only one $4 million exemption can be applied. Starting in 2019, though, the higher exemption which will match the federal estate tax exemption will be portable, meaning a married couple can protect up to double the exemption after both spouses have died.
Federal Estate Tax
There is also a federal estate tax that may apply, but it has a much higher exemption. The federal estate tax exemption is $11.18 million in 2018, after the 2017 tax law took effect. It is also portable between spouses, meaning if the right legal steps are taken a married couple can protect up to $22.36 million.
If an estate exceeds that amount, the tax rates range from 18% to 40%. A full chart of federal estate tax rates is below. You can use the same method described in the Maryland Estate Tax section to figure out the federal estate tax burden based on the table below.
|FEDERAL ESTATE TAX RATES|
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $10,000||$0||18%||$1|
|$10,000 – $20,000||$1,800||20%||$10,000|
|$20,000 – $40,000||$3,800||22%||$20,000|
|$40,000 – $60,000||$8,200||24%||$40,000|
|$60,000 – $80,000||$13,000||26%||$60,000|
|$80,000 – $100,000||$18,200||28%||$80,000|
|$100,000 – $150,000||$23,800||30%||$100,000|
|$150,000 – $250,000||$38,800||32%||$150,000|
|$250,000 – $500,000||$70,800||34%||$250,000|
|$500,000 – $750,000||$155,800||37%||$500,000|
|$750,000 – $1 million||$248,300||39%||$750,000|
|Over $1 million||$345,800||40%||$1 million|
*The taxable estate is the total above the exemption of $11.18 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Maryland Tax Picture
Maryland is moderately tax-friendly for retirees. Social Security is not taxed but other retirement income is. Maryland’s income tax rates ranges from 2% – 5.75%. Additionally, it is one of a few states in the nation where local governments can levy their own income tax, ranging from 1.75% to 3.2%. If you’re new to Maryland or have a new job, you can figure out what your take home pay will be, using our Maryland paycheck calculator.
The average effective property tax rate in Maryland is 1.10%. That’s lower than the national average, but home values in Maryland do tend to be higher. Sales tax in the state is 6%.
Estate Planning Tips
- If you think you need help figuring out estate planning or any other financial questions, you may want to look into hiring a financial advisor. They’ll be able to guide you toward making the best decisions for you and your family. SmartAsset has a financial advisor matching service that can help you find the right advisor for your needs. After answering a few questions, our system will find up to three financial advisors in your area who meet your specifications. The advisors will get in contact with you to see if you want to work with them. All advisors on SmartAsset’s platform are free of disclosures and have been fully vetted.
- Knowing all about your retirement income is key when planning your estate. Though you may have saved for years through retirement plans or a pension, don’t forget about the Social Security payments you’ll be getting from the government each month. This Social Security calculator can help you figure out just how much that check will be for.
- There are many different ways to plan an estate, from a simple will to a living trust. Don’t get too focused on one way of planning your estate; instead, figure out what’s best for your specific situation and avoid these common estate planning errors.
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