Skip to main content
Maryland Estate and Inheritance Tax
Support GuideMaryland15 min read

Maryland Estate and Inheritance Tax

Maryland is the only state with both an estate tax and an inheritance tax. Learn the $5 million exemption, the 10% inheritance tax, and who is exempt.

By Settled Editorial

Maryland is the only state that charges both a state estate tax and a state inheritance tax, and it sits on top of the federal estate tax. Most families owe none of the three. The estate tax reaches only estates above a $5 million exemption, and the inheritance tax exempts spouses, children, parents, grandparents, and siblings.

That mix makes Maryland unusual, and it means families here answer a few more tax questions than families in states with no death tax at all. This guide keeps the taxes apart. It covers the Maryland estate tax first, then the Maryland inheritance tax and who it exempts, then the federal estate tax, and finally how all of that differs from the step-up in basis that most heirs actually rely on.

Three Taxes an Estate Can Face in Maryland

The single most useful thing to get straight is that three separate taxes can touch a Maryland estate, and they work in different ways:

  • Maryland estate tax. Charged on the estate as a whole, only above a $5,000,000 exemption, at a top rate of 16%. Administered by the Comptroller of Maryland.
  • Maryland inheritance tax. Charged on the property individual heirs receive, at a flat 10%, but only when the heir is outside a protected group of close relatives. Collected by the Register of Wills.
  • Federal estate tax. Charged on the estate as a whole, only above the $15 million federal exclusion for 2026, at rates up to 40%. Administered by the IRS.

For most Maryland families the answer to all three is zero. A typical estate falls under the $5,000,000 state exemption, passes to a spouse or children who are exempt from the inheritance tax, and sits far below the federal exclusion. The rest of this guide walks through each tax so you can tell which, if any, applies to your situation.

The Maryland Estate Tax

Maryland taxes an estate only when the taxable estate is worth more than $5,000,000. Below that line, no Maryland estate tax is due. Above it, the state taxes the excess at a top rate of 16%.

Md. Code, Tax-General Section 7-309 sets the exemption at $5,000,000 for anyone dying on or after January 1, 2019. Two features of that number matter:

  • It is fixed, not indexed. The $5,000,000 figure has not risen with inflation since 2019, so more estates cross it over time as asset values grow.
  • It is far below the federal exclusion. With the federal number at $15 million for 2026, an estate can owe Maryland estate tax and owe no federal estate tax at all. This is the trap that surprises Maryland families who assume the high federal figure protects them.

The Maryland estate tax return is Form MET-1, filed with the Comptroller of Maryland. It is due nine months after the date of death, and a six-month filing extension may be available. An estate generally has to file when the gross estate plus adjusted taxable gifts reaches the $5,000,000 exemption, or when the family makes a Maryland portability election.

Maryland Estate Tax Portability

Maryland allows a portability-style election of its own. Under Section 7-309, a surviving spouse can add a predeceased spouse's unused Maryland exemption to their own, so a married couple can shield up to $10,000,000 from the state estate tax.

The election is not automatic. The estate of the first spouse to die has to file a timely Maryland estate tax return with an irrevocable portability election, or the family has to have made a federal portability election under Internal Revenue Code Section 2010(c). Skipping that filing after the first death can waste the first spouse's $5,000,000 exemption and leave the survivor's estate exposed to the 16% tax later.

The Maryland Inheritance Tax

The Maryland inheritance tax is a different animal. Instead of taxing the estate as a whole, it taxes what an individual receives, and the rate turns entirely on that person's relationship to the one who died. Under Md. Code, Tax-General Section 7-204, the rate is 10% of the clear value of property that passes to a taxable recipient. Clear value means fair market value minus allowable expenses.

The tax is collected by the Register of Wills for the county where the estate is administered, and it stands as a lien on the property until it is paid. Because the tax is keyed to who inherits rather than to how large the estate is, a small estate can owe the inheritance tax while a large one owes none.

Who Is Exempt From the Maryland Inheritance Tax

This is where Maryland is more generous than many people expect. Md. Code, Tax-General Section 7-203 exempts property that passes to a close circle of family:

  • The decedent's spouse
  • A child of the decedent, or a lineal descendant of a child (grandchildren, great-grandchildren)
  • A parent of the decedent
  • A grandparent of the decedent
  • A brother or sister of the decedent
  • A spouse of a child or of a lineal descendant, and the surviving spouse of a deceased child who has not remarried
  • A corporation, partnership, or limited liability company owned entirely by the exempt individuals above

The 10% inheritance tax falls on everyone outside that circle: nieces, nephews, cousins, aunts, uncles, friends, and unrelated people. So a family that leaves everything to children owes no Maryland inheritance tax, while a person who leaves a bequest to a niece triggers the 10% rate on that share.

The sibling exemption stands out. Maryland fully exempts brothers and sisters, which sets it apart from a state like neighboring Pennsylvania, where siblings pay a 12% inheritance tax. Getting the class of the recipient right is the whole ballgame for this tax.

When Both Maryland Taxes Apply

Because Maryland runs both taxes, a large estate that leaves property to a non-exempt heir can face the estate tax and the inheritance tax at once. Maryland softens the double bite: the estate tax calculation allows a credit for inheritance tax paid, so the same value is not taxed twice at the full combined rate. Even so, an estate near the $5,000,000 line with bequests to nieces or nephews is a case where the numbers get complicated and a tax professional earns the fee.

The Federal Estate Tax

The federal estate tax applies only to estates above the exclusion amount set by federal law.

For deaths in 2026, the federal exclusion is $15 million per person. That means:

  • One person can pass up to $15 million free of federal estate tax.
  • A married couple can shield up to $30 million using portability (covered below).
  • Only the amount above the exclusion is taxed.
  • The top federal estate tax rate is 40%.

The exclusion is indexed for inflation, so it rises in future years. Because the tax reaches only the amount over $15 million, the effective rate on a whole estate is always below 40%, and for the overwhelming majority of Maryland estates it is zero.

A Note on the 2026 Federal Law

Many older estate planning documents warned that the exclusion would roughly cut in half at the start of 2026 under a sunset provision in the 2017 tax law. That sunset did not take effect. Under current federal law the exclusion is $15 million per person for 2026, indexed for inflation in later years. If your plan includes trusts or gifting programs built around a lower federal number, review it with your attorney, because the strategy may no longer be needed and could work against the step-up in basis rules.

What Counts in the Estate

Both the Maryland estate tax and the federal estate tax measure a "gross estate" that is broader than what passes through probate or is listed in a will. Under Internal Revenue Code Sections 2031 through 2046, it generally includes:

  • Real estate, bank and brokerage accounts, stocks, and bonds
  • Life insurance proceeds on a policy the decedent owned or controlled (ownership, not who the beneficiary is, drives inclusion)
  • Retirement accounts such as IRAs, 401(k)s, and 403(b)s
  • Business interests and closely held company stock
  • The decedent's share of jointly owned property
  • Assets in a revocable living trust
  • Certain gifts made within three years of death, particularly transfers of life insurance
  • Powers of appointment the decedent held

Someone with a paid-off Maryland home, a large IRA, and a life insurance policy can have a gross estate far bigger than their probate estate, because most of those assets pass outside probate but still count toward the tax thresholds. The gross estate is then reduced by debts, funeral and administration expenses, and the deductions below to reach the taxable estate.

Deductions That Shrink the Taxable Estate

Two deductions wipe out estate tax for most families, even wealthy ones:

Unlimited marital deduction. Property left outright to a surviving spouse who is a U.S. citizen passes free of estate tax with no dollar limit. This is why most married couples owe nothing when the first spouse dies. Maryland mirrors that spouse-friendly treatment on the inheritance side, where a surviving spouse is fully exempt.

Unlimited charitable deduction. Property left to a qualified charity is fully deductible from the estate, dollar for dollar.

Debts, funeral costs, and estate administration expenses also reduce the taxable estate.

Portability and Form 706 at the Federal Level

When the first spouse in a marriage dies, their unused federal exclusion does not vanish on its own. Under the federal portability election, the surviving spouse can claim the deceased spousal unused exclusion, or DSUE, and add it to their own.

Example. A husband dies in 2026 with a $4 million estate and uses $4 million of his $15 million federal exclusion. His remaining $11 million can transfer to his wife. She then has her own $15 million plus his $11 million, a combined $26 million shielded from federal estate tax.

Here is the catch: portability is not automatic. The executor has to file IRS Form 706, the United States Estate Tax Return, to make the election. The return is due nine months after death, with a six-month extension available, and the filing is needed even when the estate owes no federal tax and sits far below the exclusion.

Remember that this is a separate election from the Maryland one. A Maryland family may need to weigh two portability filings after a first death: the federal Form 706 to preserve the $15 million federal exclusion, and a Maryland return to preserve the $5,000,000 state exemption. An attorney can handle both together.

Estate Tax Is Not the Step-Up in Basis

Two very different taxes get confused here, so keep them apart.

The estate tax (state or federal) is a transfer tax on the value of the estate at death. The Maryland version starts at $5,000,000 and the federal version at $15 million, so together they reach a small share of estates.

The step-up in basis is an income-tax rule that applies to nearly every inherited asset regardless of estate size. Under Internal Revenue Code Section 1014, an inherited asset's cost basis resets to its fair market value on the date of death. That lowers the capital gains tax an heir owes when they later sell. Maryland is a common-law (separate-property) state, so only the decedent's share of jointly owned property steps up. See the Maryland step-up in basis guide for how the basis reset works and how Maryland taxes any gain.

For most Maryland families, the taxes that actually show up are the 10% inheritance tax on gifts to more distant relatives and the step-up that limits capital gains when heirs sell, not the estate tax. If you plan to sell an inherited home, the guide on selling inherited property in Maryland walks through how the stepped-up basis limits the gain.

Practical Takeaways for Maryland Families

Most Maryland estates need no estate tax planning at all, but the dual-tax setup means it pays to run a quick check:

  1. Measure against the $5,000,000 state line, not the federal one. Add up everything, including life insurance you own and retirement accounts, not just probate assets. Maryland's exemption is far lower than the federal figure, so this is the number that catches families off guard. Use the Maryland estate tax calculator to estimate the tax on an estate above that line.
  2. Look at who inherits, not just how much. The 10% inheritance tax turns on the recipient. Bequests to a spouse, children, parents, grandparents, or siblings are exempt, while gifts to nieces, nephews, cousins, or friends are taxed.
  3. Preserve portability after a first death. Consider filing to lock in a deceased spouse's unused exemption at both the state and federal level, even when no tax is due. It is a low-cost safeguard.
  4. Lean on the step-up. Holding appreciated assets until death gives heirs a stepped-up basis. Gifting those same assets during life hands the recipient your old basis and wastes the step-up.
  5. Get help when the estate is large or the heirs are mixed. An estate near the $5,000,000 line, bequests to non-exempt heirs, business or farm interests, or out-of-state property are the cases where an attorney and a CPA earn their fee.

To see how settling an estate works step by step, start with the Maryland probate guide, and if you are weighing ways to plan around these taxes, read how to avoid probate in Maryland.

Frequently Asked Questions

Does Maryland have an estate tax or an inheritance tax?

Both. Maryland is the only state that charges a state estate tax and a state inheritance tax at the same time. The estate tax applies to the whole estate above a $5,000,000 exemption under Md. Tax-General Section 7-309. The inheritance tax is a separate 10% tax under Section 7-204 on property passing to certain heirs. On top of both sits the federal estate tax, which reaches only estates above the federal exclusion.

Who is exempt from the Maryland inheritance tax?

Under Md. Tax-General Section 7-203, property passing to a spouse, a child or other lineal descendant, a parent, a grandparent, or a brother or sister is exempt. Maryland is one of the few states that fully exempts siblings. The 10% inheritance tax mainly hits property left to nieces, nephews, cousins, friends, and unrelated people.

How much can pass free of the Maryland estate tax?

The Maryland estate tax exemption is $5,000,000 for anyone dying on or after January 1, 2019, under Md. Tax-General Section 7-309. The exemption is fixed by statute and is not indexed for inflation. Value above $5,000,000 is taxed at a top rate of 16%. Because $5,000,000 is far below the federal exclusion, an estate can owe Maryland estate tax while owing no federal estate tax.

Do I still owe federal estate tax if I live in Maryland?

Only if the estate is very large. For deaths in 2026 the federal exclusion is $15 million per person, and only the amount above it is taxed, at rates up to 40%. Most Maryland families owe no federal estate tax. The executor files IRS Form 706 when the estate tops the exclusion or when the family wants to elect portability for a surviving spouse.

Is the Maryland inheritance tax the same as the estate tax?

No. The Maryland estate tax is charged to the estate as a whole and applies only above $5,000,000. The Maryland inheritance tax is charged on what individual heirs receive and turns entirely on the relationship, not the size of the estate. A modest estate left to a niece can owe the 10% inheritance tax and no estate tax at all.

Related Maryland Guides

Sources:

It is not legal advice.

Information current as of July 21, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in Maryland can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

Need help with your probate case?

Answer a few questions to see whether Maryland probate is required and which process applies.

Take the 2-minute assessment
All Maryland guides← Back to all articles