Data Notice: Retirement account limits and income thresholds in “Retirement Tax in Maryland: Complete Guide 2026” are projected 2026 figures from IRS inflation adjustments. Contribution limits are published annually in IRS Notices. Verify current figures at IRS.gov before making retirement planning decisions. [retirement-tax-maryland-2026]

Retirement Tax in Maryland: Complete Guide 2026

The content in this retirement tax in maryland: complete guide 2026 guide is educational and informational. It should not be relied upon as tax, legal, or financial advice. Individual tax situations require personalized analysis by a qualified professional. Consult a CPA or enrolled agent for your specific needs.

Maryland offers a moderately favorable tax environment for retirees, with a pension exclusion that can shield a meaningful portion of retirement income from state tax. Social Security benefits are fully exempt, and the state provides additional benefits for military retirees and lower-income seniors. However, Maryland’s combined state and county income tax rates can be relatively high, and the pension exclusion has income-based limitations. Understanding how these pieces fit together is essential for Maryland retirees.

Maryland Retirement Tax Rates (2026)

Income Type	State Tax Treatment
Social Security	Fully exempt
Pension / 401(k) / IRA (age 65+)	Exclusion up to ~$36,200 per person
Pension / 401(k) / IRA (under 65)	Limited exclusion
Military retirement pay	First ~$12,500 exempt (under 55); up to ~$36,200 (55+)
State/local government pensions	Qualify for pension exclusion
County income tax	~1.75% to ~3.20% (additional)

Maryland’s graduated state income tax ranges from ~2% to ~5.75%. County income taxes add ~1.75% to ~3.20% on top of the state rate, making the combined top rate as high as ~8.95%.

How Retirement Income Is Taxed in Maryland

Maryland’s Pension Exclusion

Maryland allows individuals aged 65+ (or totally disabled, or whose spouse is totally disabled) to exclude up to ~$36,200 per person of qualifying retirement income, including:

Employer pensions and annuities
401(k) and 403(b) distributions
IRA withdrawals
Federal government pensions
State and local government pensions

The exclusion is reduced dollar-for-dollar by the amount of Social Security and Railroad Retirement Tier 1 benefits received. This means retirees receiving significant Social Security may see their pension exclusion reduced or eliminated.

Example: A retiree age 65+ receiving ~$24,000 in Social Security and ~$50,000 in pension income would have their pension exclusion reduced to ~~$12,200 (~~$36,200 minus ~$24,000 Social Security), leaving ~$37,800 of pension income subject to Maryland tax.

Maryland fully exempts Social Security benefits from state income tax.

Military Retirement Pay

Maryland provides an exclusion for military retirement pay. Retirees under age 55 may exclude the first ~$12,500 annually. Those 55 and older may use the full pension exclusion of up to ~$36,200, reduced by Social Security received.

County Income Tax

All Maryland residents pay a county income tax in addition to the state tax. Rates range from ~1.75% (Worcester County) to ~3.20% (Howard, Montgomery, Prince George’s, and several other counties). County taxes apply to the same taxable income as the state tax, so retirement income above the pension exclusion is subject to both state and county taxes.

Retirement Income Tax Scenarios

Scenario	State Tax	County Tax (est.)	Combined State/County
SS ~$25K + pension ~$40K, age 65+	~$540	~$290	~$830
SS ~$30K + 401(k) ~$60K, age 65+	~$1,575	~$1,020	~$2,595
Pension only ~$50K, age 65+ (no SS)	~$540	~$350	~$890
Military ~$30K, age 56	~$0 (within exclusion)	~$0	~$0
MFJ, both 65+, total retirement ~$100K	~$920	~$600	~$1,520

Comparison to Neighboring States

State	Social Security	Pension Exclusion	Top Rate (state + local)
Maryland	Exempt	Up to ~$36,200 (reduced by SS)	~8.95%
Virginia	Exempt	Age Deduction up to ~$12,000	~5.75%
Pennsylvania	Exempt	Fully exempt at retirement age	~3.07%
Delaware	Exempt	~$12,500 exclusion (60+)	~6.6%
D.C.	Exempt	No exclusion	~10.75%
West Virginia	Exempt	Limited adjustments	~6.5%

Maryland’s pension exclusion is more generous than Virginia’s or Delaware’s but comes with the Social Security offset. Pennsylvania stands out by fully exempting retirement income from state tax for qualifying retirees.

Tips for Maryland Retirees

Understand the Social Security offset — your pension exclusion is reduced by your Social Security benefits. If your SS exceeds ~$36,200, you receive no pension exclusion at all.
Consider delaying Social Security if doing so would preserve a larger pension exclusion in the near term, though this depends on your overall retirement plan.
Factor in the county tax — Maryland’s county income taxes add ~1.75% to ~3.20%, significantly increasing the total tax on retirement income. Moving to a lower-county-rate jurisdiction can save hundreds or thousands annually.
Use Roth conversions before age 65 to shift income into tax-free Roth withdrawals that do not count as taxable retirement income in Maryland.
Claim the pension exclusion on Form 502 — ensure you complete the pension exclusion worksheet accurately, accounting for the Social Security offset.
Explore the property tax credit if your retirement income is limited — Maryland’s Homeowners’ Tax Credit provides income-based property tax relief. See the federal income tax guide for details on deducting property taxes federally.
Consult a tax professional for complex situations, especially if you receive retirement income from multiple states. See find a CPA near you.

Key Takeaways

Maryland exempts Social Security benefits from state income tax.
The pension exclusion of up to ~$36,200 per person (age 65+) is reduced by Social Security benefits received.
County income taxes of ~1.75% to ~3.20% apply to taxable retirement income in addition to state rates.
Military retirees aged 55+ qualify for the pension exclusion; those under 55 receive a ~$12,500 exemption.
Maryland has no state estate or inheritance tax on direct heirs (estates under ~$5 million are exempt from Maryland estate tax).
The combined state and county top rate of ~8.95% makes Maryland one of the higher-tax states in the region for retirees with income above the exclusion.

Next Steps

Federal Income Tax Guide 2026 — learn how federal retirement income rules affect your Maryland taxes.
State Income Tax Rates Comparison 2026 — compare Maryland’s retirement tax environment to other states.
Tax Bracket Calculator — estimate your combined federal and Maryland retirement tax liability.
Find a CPA Near You — work with a Maryland tax professional on retirement income strategies.