Retiring in Maryland: What the State Actually Takes

On the ordinary retirement profile — $34,000 of Social Security and $61,000 of plan distributions — Maryland takes $603 a year in state income tax.

That is the number people compare, and it is the smallest of three. Property tax adds about $4,264 on the state's $463,449 median home, and insurance another $2,845. The three together come to $7,712, placing Maryland 27th of 50.

A note before you start. This is general education, not tax advice. Every Maryland figure comes from this site's own fifty-state income-tax dataset and its retirement tax engine, computed for a single filer aged 70 unless stated otherwise; property tax, median home price and insurance figures come from the site's core state dataset. Rates are for tax year 2026. Property tax is assessed locally in most states, so the effective rate here is a statewide figure rather than your county's.

1. What Maryland takes from retirement income

On Social Security. Maryland does not tax Social Security or Railroad Retirement benefits. Any amount taxable on the federal return and carried into Maryland AGI is subtracted in full on Form 502, with no income threshold and no age condition. It is not merely exempt, it is an offset: benefits received under the Social Security Act and Railroad Retirement Act reduce the pension exclusion dollar for dollar (see qualifiedPlanDistributions), and for that purpose all benefits received are counted, not just the portion that was federally taxable.

On 401(k) and IRA distributions. The scope is narrower than the dollar figure suggests, and this is the most commonly misstated Maryland fact. The $40,600 maximum pension exclusion for calendar year 2026 applies only to income received as a pension, annuity or endowment from an employee retirement System qualified under Internal Revenue Code section 401(a), 403 or 457(b). A 401(k) or 403(b) distribution qualifies. An IRA does not. The Comptroller lists the disqualified vehicles explicitly: a traditional IRA, a Roth IRA, a rollover IRA, a simplified employee plan (SEP), a Keogh plan, an ineligible deferred compensation plan, and foreign retirement income all fail to qualify. A retiree who rolled a 401(k) into an IRA has, in Maryland, converted excludable income into fully taxable income.

2. The rule that decides your Maryland bill

Private and public pensions are treated identically under the $40,600 pension exclusion, because Maryland's test is the plan type (an IRC 401(a)/403/457(b) employee retirement system) rather than the identity of the employer. A private employer's defined benefit plan and a Maryland state or county plan both qualify; neither gets a larger allowance than the other. Military is different in both direction and shape, and the $40,600 recorded above does not apply to it. Military retirement income has its own separate subtraction with its own age break: up to $20,000 for a taxpayer at least 55 years old on the last day of the tax year, and up to $12,500 for a taxpayer under 55. It has no 65-year-old trigger, so a 45-year-old military retiree gets $12,500 while a 45-year-old private-pension retiree gets nothing. Eligible service covers an active or reserve component of the U.S. armed forces, the Maryland National Guard, or retirement from active duty with the commissioned corps of the Public Health Service, NOAA, or the Coast and Geodetic Survey; survivor and death benefits are included.

Maryland also offers a nonrefundable senior tax credit of $1,000 for a resident at least 65 on the last day of the year with federal AGI not over $100,000 filing single, or $1,750 for married filing jointly, qualifying surviving spouse and head of household with federal AGI not over $150,000 - reduced to $1,000 if only one spouse on a joint return is at least 65. It is claimed on Part M of Form 502CR and is separate from, and stackable with, the pension exclusion.

A taxpayer at least 100 years old may subtract up to $100,000 of income.

3. What Maryland charges at three income levels

The same state, three retirements. All figures are for a single filer aged 70.

Read down the middle column. The exemption that makes a modest retirement free here is worth nothing to an affluent one — the bill goes from $0 to $4,356 as income rises. That is a phase-out, and it is the single most misreported feature of state retirement taxation.

A married couple with $48,000 of Social Security and $62,000 of distributions pays $489.

4. Property tax, and why it lands harder in retirement

An effective rate of 0.9% on the state's $463,449 median home is about $4,264 a year.

For a retiree this is a harder cost than income tax, and the reason is structural: property tax is levied on the house, while retirement income falls. A bill sized to a working income arrives every year after the income has gone.

It is also assessed locally almost everywhere, so a statewide effective rate conceals real variation between counties. Treat the figure above as the state's shape rather than as your bill.

Maryland does have a homestead provision, and it is the one lever on this line worth understanding.

Maryland's Homestead Property Tax Credit is not an exemption on the home's assessed value but a credit that caps how much a primary residence's taxable assessment can increase year over year — the state caps this at 10% per year, and individual counties/municipalities may set a lower local cap (0%-10%; e.g. Montgomery County uses 10% statewide except the Town of Kensington at 5%). It does not limit the property's actual market value or assessment as determined by the Department of Assessments and Taxation, only the portion subject to tax. Homeowners must file a one-time application with the Maryland Department of Assessments and Taxation (SDAT) to receive the credit; it does not apply automatically to a newly purchased home in the year of purchase.

Two things about homestead rules catch people out after a move. They almost always require the property to be your primary residence, which a snowbird splitting the year has to be able to demonstrate. And several states require an application to the county rather than granting it automatically — a benefit you qualify for and never claimed is worth nothing.

5. Insurance, the line nobody prices

Average home insurance in Maryland: $2,845 a year — 30th cheapest of the fifty states.

This is the line almost no retirement comparison includes, and across the country it varies more than income tax does: from Hawaii's $900 to Florida's $8,375, a ninefold spread.

For a retiree it behaves like a second property tax. It rises independently of income, a fixed-income household absorbs the whole increase, and it is a condition of the mortgage if you still have one.

6. What retiring in Maryland actually costs

Income tax on the typical retirement profile, plus property tax and insurance on each state's own median home. Maryland is shown against its own neighbours in the ranking, and against the extremes.

Maryland comes to $7,712, 27th of 50.

Income tax is 8% of that total. It is the line every comparison leads with and, here, not the largest of the three.

One large caveat, and it matters. Each row uses that state's own median home, and those differ a great deal. So this compares the typical house in each state, not the same house in each state — buying below a state's median improves its figure materially.

7. The age that changes your Maryland bill

The same $50,000 of plan distributions costs $2,009 at 60 and $82 at 70. That is an age trigger, and it is worth $1,927 a year to wait — or, put the other way, it is what retiring early costs you in Maryland on top of everything else. The scope is narrower than the dollar figure suggests, and this is the most commonly misstated Maryland fact. The $40,600 maximum pension exclusion for calendar year 2026 applies only to income received as a pension, annuity or endowment from an employee retirement System qualified under Internal Revenue Code section 401(a), 403 or 457(b). A 401(k) or 403(b) distribution qualifies. An IRA does not. The Comptroller lists the disqualified vehicles explicitly: a traditional IRA, a Roth IRA, a rollover IRA, a simplified employee plan (SEP), a Keogh plan, an ineligible deferred compensation plan, and foreign retirement income all fail to qualify. A retiree who rolled a 401(k) into an IRA has, in Maryland, converted excludable income into fully taxable income. It also changes the withdrawal order. Someone retiring before the trigger age has a reason to draw on taxable or Roth money first and leave the pre-tax balance until the exclusion applies.

8. What a Roth conversion costs in Maryland

Converting $50,000 to a Roth costs an extra $2,375 in Maryland tax — 4.8 cents on the dollar.

These are computed, not read off the bracket table, which matters because a conversion large enough to be worth making usually leaves the bracket it started in.

The state's share is the part you can move. Convert in a year you are resident somewhere with no income tax and it is zero; convert here and it is 4.8%. The federal tax is due either way.

9. What part-time work costs here

$20,000 of part-time work costs an extra $950 in Maryland tax — an effective 4.8% on the earnings.

Compare that with the 4.8% a Roth conversion costs. The state treats the two identically, which keeps the decision a non-tax one.

Two federal rules apply on top and neither depends on your state. Earnings can raise the taxable share of Social Security, and claiming before full retirement age exposes you to the federal earnings test.

10. The order to draw your accounts in

The order you draw accounts in is worth real money, and the right order depends on the state.

Before the age trigger, draw from taxable and Roth money first. Maryland charges $2,009 on $50,000 of plan distributions at 60 and $82 at 70, so a dollar taken early costs more than the same dollar taken later.

After the trigger, the pre-tax balance becomes the cheap source and the order reverses.

Required minimum distributions overrule all of this from 73 onward. Once they begin you must take the calculated amount whether the order suits you or not, which is the argument for drawing down or converting the pre-tax balance in the years before.

11. Or move across the state line

For most people the real alternative to Maryland is not Wyoming — it is the state on the other side of the line, near the same family, the same doctors and the same weather.

West Virginia is the cheapest of the group at $5,544, $2,168 below Maryland. Whether that is worth a move is a question about your life rather than your spreadsheet — but it is the comparison worth running, because it is the one you could actually act on.

One thing this table cannot show is the county. Property tax is set locally, and the spread inside a single state is routinely wider than the gap between two neighbouring states. A border move to a cheaper state and an expensive county can leave you worse off.

12. If you are moving to Maryland from somewhere else

The eight most populous states people leave, measured against Maryland on the same three lines.

Maryland is cheaper than 5 of these eight. Which means the answer genuinely depends on where you are starting from.

A move is not free, and this table does not price it. Transaction costs on both houses run to several per cent of the sale price, and at typical values that is often more than the first two or three years of the saving.

Maryland charges a transfer tax on the purchase itself — 0.5%, customarily paid by the split. On the state's $463,449 median home that is about $2,317, once, at the point of sale. Closing costs here run about 2% to 5% of the price — $9,269 to $23,172 on the median home, which is the real entry fee for the annual saving this article has been describing.

13. What Maryland does not exempt you from

The federal system, entirely. This is the commonest misunderstanding about state retirement taxation, and it is worth stating plainly.

Required minimum distributions still apply. The amount is federal — your prior-year balance divided by an IRS life expectancy factor — and identical in all fifty states. A state changes what the distribution costs you, not whether you must take it.

Social Security is still federally taxable, on the federal provisional-income calculation, whatever your state does with it.

IRMAA still applies, with its two-year lag. A large conversion or distribution raises a Medicare premium two years later regardless of address.

And capital gains are still federally taxed. What Maryland adds on top is a separate question from what the federal system takes.

14. Establishing that you actually live here

Any state tax advantage is worth nothing until Maryland is your domicile, and the state you left may disagree about when that happened.

High-tax states audit departing residents. The question is not whether you own a home here; it is whether you genuinely abandoned the old domicile. Days spent in each state, voter registration, vehicle registration, where your doctors are and where you claim a homestead all bear on it.

The snowbird case is the risky one. Splitting the year between two states while keeping a home in both is exactly the profile a residency audit is built for. If a plan depends on the saving, count the days from the first year rather than reconstructing them afterwards.

15. Who Maryland actually suits

Someone on a modest retirement income. Maryland charges $0 at the modest profile — the exemption does its work at the bottom of the range.

It suits an affluent retiree least. At the affluent profile the bill is $4,356, and whatever exclusion helps a modest income has stopped helping by then.

16. What to check before you decide

Get your county's actual property tax rate, not the state average. Property tax is levied locally almost everywhere, and the spread inside a state is often wider than the spread between states.

Get a real insurance quote on a real address. $2,845 is the state average; construction, roof age and exposure move it a long way.

Work out your own income tax rather than using the profile above. $95,000 split one way is not $95,000 split another, and in Maryland the mix between Social Security and distributions changes the answer.

And check what your current state actually charges you before assuming it is worse. On these three lines the ranking surprises people in both directions.

Frequently asked questions

Does Maryland tax Social Security? No. Maryland does not tax Social Security or Railroad Retirement benefits. Any amount taxable on the federal return and carried into Maryland AGI is subtracted in full on Form 502, with no income threshold and no age condition. It is not merely exempt, it is an offset: benefits received under the Social Security Act and Railroad Retirement Act reduce the pension exclusion dollar for dollar (see qualifiedPlanDistributions), and for that purpose all benefits received are counted, not just the portion that was federally taxable.

Does Maryland tax 401(k) or IRA withdrawals? The scope is narrower than the dollar figure suggests, and this is the most commonly misstated Maryland fact. The $40,600 maximum pension exclusion for calendar year 2026 applies only to income received as a pension, annuity or endowment from an employee retirement System qualified under Internal Revenue Code section 401(a), 403 or 457(b). A 401(k) or 403(b) distribution qualifies. An IRA does not.

What about pensions — private, government, or military? A $50,000 pension costs $82 if private, $82 if a government pension, and $82 if military retired pay.

What does retiring in Maryland actually cost? Income tax of $603 on the typical profile, plus about $4,264 of property tax and $2,845 of insurance on the median home — $7,712, which is 27th of 50.

Is Maryland a cheap state to retire in? On these three lines it ranks 27th of 50. Whether that makes it cheap for you depends far more on the house than on the tax code.

Is there an age at which the tax falls? Yes. The same $50,000 of plan distributions costs $2,009 at 60 and $82 at 70.

Does the exemption phase out? Yes. It is worth most at a modest income — $0 — and nothing by the affluent profile, where the bill is $4,356.

What does a Roth conversion cost in Maryland? An extra $2,375 in state tax on $50,000 converted, and $4,784 on $100,000. That is 4.8% of the amount converted, on top of the federal tax.

Does part-time work get taxed differently from my 401(k) withdrawals? $20,000 of part-time earnings costs $950 in state tax, an effective 4.8%.

Would a neighbouring state be cheaper than Maryland? West Virginia is the cheapest of Maryland and its neighbours at $5,544 against Maryland's $7,712.

Do required minimum distributions change if I move here? No. The required amount is a federal calculation and identical in every state. What changes is what the distribution costs once taken.

Does this article include local income tax? Some Maryland localities levy their own income tax on top of the state figure above — for example Allegany County 3.2%, Baltimore City 3.2%, Baltimore County 3.2%, Calvert County 3.2%, Caroline County 3.2%, Carroll County 3.03%, Cecil County 2.74%, Charles County 3.03%, Dorchester County 3.3%, Garrett County 2.65%, Harford County 3.06%, Howard County 3.2%, Kent County 3.3%, Montgomery County 3.2%,

Will Maryland's treatment still apply in ten years? State legislatures revise retirement taxation regularly — several states have changed theirs in the past three years. Figures here are for tax year 2026 and are worth re-checking before a move.

What to do next

Two numbers decide this and neither is the one in the headline: your county's actual property tax rate, and a real insurance quote on a real address.

• Retirement state tax calculator — what any state charges on your income, cited per state
• RMD calculator — the distribution you must take, which no state changes
• Home insurance premium estimator — the line this article says decides it
• The Relocation Tax Playbook — establishing domicile, and the states that contest it