Complete Guide to Maryland LLC Taxes in 2025
Maryland presents one of the most complex state tax environments for LLC owners, combining graduated state income tax rates from 2% to 5.75% with mandatory local (county/city) income taxes ranging from 2.25% to 3.2%. The resulting combined state and local income tax burden of approximately 4.25% to 8.95% makes Maryland one of the higher-tax states, particularly when coupled with a $300 annual report fee. However, Maryland's proximity to Washington D.C. and its strong economy continue to attract business formations. This guide covers everything Maryland LLC owners need to know.
How Maryland Taxes LLCs
Maryland follows federal classification, treating LLCs as pass-through entities. Members report their share on Maryland Form 502 (Individual Income Tax Return). Maryland does not impose a separate entity-level income tax on pass-through LLCs. However, the combination of state and local income taxes creates one of the higher total burdens in the nation.
Key Point: Maryland is one of only a handful of states that impose mandatory local income taxes in addition to the state income tax. Every Maryland county and Baltimore City levies its own income tax rate, ranging from 2.25% (Worcester County) to 3.20% (several counties including Howard, Montgomery, and Prince George's). These local taxes are in addition to the state rates, not included in them.
Maryland State Income Tax Brackets
| Taxable Income (Single) | Rate |
|---|---|
| $0 - $1,000 | 2.00% |
| $1,001 - $2,000 | 3.00% |
| $2,001 - $3,000 | 4.00% |
| $3,001 - $100,000 | 4.75% |
| $100,001 - $125,000 | 5.00% |
| $125,001 - $150,000 | 5.25% |
| $150,001 - $250,000 | 5.50% |
| Over $250,000 | 5.75% |
For married filing jointly, the thresholds at the higher end increase ($150K, $175K, $225K, $300K). The first three brackets remain the same.
Maryland Local Income Tax Rates
Every county and Baltimore City imposes a local income tax. These rates are applied to Maryland taxable income and collected by the state on behalf of the localities. Key county rates:
| County | Rate | County | Rate |
|---|---|---|---|
| Montgomery | 3.20% | Baltimore County | 3.20% |
| Prince George's | 3.20% | Howard | 3.20% |
| Anne Arundel | 2.81% | Baltimore City | 3.20% |
| Frederick | 2.96% | Worcester | 2.25% |
The combined state + local rate ranges from approximately 4.25% to 8.95%, depending on income level and county. For an LLC owner in Montgomery County with income over $250,000, the combined rate is 5.75% + 3.20% = 8.95%.
Federal Taxes for Maryland LLC Owners
- Self-Employment Tax: 15.3% (12.4% SS + 2.9% Medicare + 0.9% surtax)
- Federal Income Tax: 10-37% graduated brackets
- QBI Deduction: Up to 20% under Section 199A
Tax Tip: Maryland's high combined state+local rates make the PTET election extremely valuable for SALT cap workaround. Also, S-Corp election becomes more impactful given the higher total state burden. Use our S-Corp Tax Calculator to quantify the savings.
Maryland LLC Annual Report
Maryland LLCs must file an Annual Report with the Maryland State Department of Assessments and Taxation (SDAT). The filing fee is $300 -- one of the highest annual fees in the nation. The report is due by April 15 each year. Late filing or non-filing results in forfeiture of the LLC's good standing and eventually administrative dissolution.
Maryland LLC Filing Deadlines
| Filing | Deadline | Extension |
|---|---|---|
| Individual (Form 502) | April 15 | Yes, to October 15 |
| Partnership (Form 510) | March 15 | Yes, to September 15 |
| Annual Report (SDAT) | April 15 | No |
| Estimated Tax (Form 502D) | Apr 15, Jun 15, Sep 15, Jan 15 | No |
Maryland PTE Election
Maryland was one of the earliest states to enact a Pass-Through Entity Tax election. Eligible LLCs can elect to pay Maryland state income tax at the entity level at the 5.75% rate. Members receive a credit on their individual returns. This election allows the state tax to be deducted as a business expense at the federal level, bypassing the $10,000 SALT cap. Note: The local income tax is not included in the PTE -- members still pay local tax on their individual returns.
Maryland vs. Neighboring States
| State | Income Tax | Annual Fee | Entity Tax |
|---|---|---|---|
| Maryland | 2-5.75% + local 2.25-3.2% | $300 | None |
| Virginia | 2-5.75% | $50 | None |
| Delaware | 0-6.6% | $300 | None for LLCs |
| Pennsylvania | 3.07% flat | $70 decennial | None |
| West Virginia | 2.36-5.12% | $25 | None |
| Washington D.C. | 4-10.75% | $300 biennial | None |
Common Maryland LLC Tax Mistakes
- Ignoring local income tax: The 2.25-3.2% local tax on top of state rates is a major cost many overlook.
- Missing the $300 annual report: This is one of the highest in the nation and due April 15.
- Not evaluating PTE election: With combined rates near 9%, the SALT cap workaround is extremely valuable.
- Filing in the wrong county: Use the county where you lived on December 31 for local tax rate determination.
- Overlooking estimated payment requirements: Required if expecting to owe $500+ in state and local taxes combined.
- Not considering Virginia domicile: Virginia has similar state rates but no mandatory local income tax in most areas.
Dissolving a Maryland LLC
File Articles of Cancellation with SDAT ($100). File final tax returns, pay all outstanding taxes, and file a final annual report if due. Maryland has a three-year statute of limitations on tax assessments from the later of the filing date or due date.