Maryland Estate Tax Rate and Exemption: The $5 Million Threshold Explained
Maryland Estate Tax Rate and Exemption: The $5 Million Threshold Explained
Maryland maintains a state estate tax with a fixed exemption of $5 million per individual. While the federal estate tax exemption sits at $15 million (after the One Big Beautiful Bill Act of 2025), Maryland's state-level threshold hasn't moved — creating a $10 million gap where families owe zero federal estate tax but face a state bill of up to 16%.
In 2026, the Maryland General Assembly considered Senate Bill 211 to repeal the state estate tax. The bill died in committee, keeping the dual-tax framework fully intact.
How the Estate Tax Works
The Maryland estate tax applies to the total net value of a decedent's estate — both probate and non-probate assets. That includes property in your name, joint accounts, life insurance proceeds, retirement accounts, and revocable trust assets.
If the total exceeds $5 million, the estate owes tax on the portion above the exemption at graduated rates:
| Taxable Amount Above Exemption | Rate |
|---|---|
| First $40,000 | 0.8% |
| $40,001 – $90,000 | 1.6% |
| $90,001 – $140,000 | 2.4% |
| $140,001 – $240,000 | 3.2% |
| $240,001 – $440,000 | 4.0% |
| $440,001 – $640,000 | 4.8% |
| $640,001 – $840,000 | 5.6% |
| $840,001 – $1,040,000 | 6.4% |
| $1,040,001 – $1,540,000 | 7.2% |
| $1,540,001 – $2,040,000 | 8.0% |
| $2,040,001 – $2,540,000 | 8.8% |
| $2,540,001 – $3,040,000 | 9.6% |
| $3,040,001 – $3,540,000 | 10.4% |
| $3,540,001 – $4,040,000 | 11.2% |
| $4,040,001 – $5,040,000 | 12.0% |
| $5,040,001 – $6,040,000 | 12.8% |
| $6,040,001 – $7,040,000 | 13.6% |
| $7,040,001 – $8,040,000 | 14.4% |
| $8,040,001 – $9,040,000 | 15.2% |
| Over $9,040,000 | 16.0% |
On a $6 million estate, the tax on the $1 million above the exemption works out to roughly $38,800. On an $8 million estate, it's approximately $211,600.
Estate Tax vs. Inheritance Tax
Maryland is the only state that imposes both taxes, and they work differently:
Estate tax is calculated on the total estate value. It's paid by the estate before distribution. Only estates above $5 million owe it.
Inheritance tax is calculated on what each individual beneficiary receives. It's a flat 10% on transfers to non-lineal heirs (nieces, nephews, cousins, friends, unmarried partners). Close family — spouses, children, parents, grandparents, siblings, stepchildren — are fully exempt regardless of the amount.
To prevent double taxation, Maryland allows a dollar-for-dollar credit: any inheritance tax paid to the Register of Wills is subtracted from the estate tax owed to the Comptroller. If the inheritance tax equals or exceeds the estate tax, no estate tax is due.
Portability Between Spouses
Maryland allows spousal portability of the estate tax exemption. If the first spouse to die doesn't use their full $5 million exemption, the unused portion passes to the surviving spouse — effectively creating a $10 million combined exemption for married couples.
The catch: portability is not automatic. The personal representative must file a Maryland Estate Tax Return (Form MET-1) within nine months of death, even if the estate owes no tax. Missing this deadline forfeits the unused exemption permanently.
Free Download
Get the Maryland — Estate Planning Checklist
Everything in this article as a printable checklist — plus action plans and reference guides you can start using today.
The Nine-Month Filing Deadline
Form MET-1 is due nine months after the date of death. Extensions are available (Form MET-1E), but interest begins accruing on any tax owed from the nine-month mark regardless of extensions.
This deadline also intersects with the inheritance tax credit. If the inheritance tax is paid after the nine-month deadline, interest and penalties can accrue on the estate tax portion — even though the credit would ultimately reduce or eliminate it. Timing matters.
Planning Strategies for Estates Near the Threshold
Charitable giving. Bequests to qualified charities reduce the taxable estate dollar-for-dollar. A $500,000 charitable bequest on a $5.4 million estate drops it below the $5 million threshold entirely.
Lifetime gifts. Maryland does not impose a state-level gift tax, though federal gift tax rules apply. Annual exclusion gifts ($18,000 per recipient in 2025) reduce the estate over time without federal gift tax reporting.
Life insurance trusts. Life insurance proceeds are included in the estate if the decedent owned the policy. An irrevocable life insurance trust (ILIT) removes the proceeds from the taxable estate entirely.
Spousal bypass trusts. For married couples with combined estates above $10 million, a bypass trust at the first spouse's death can shelter $5 million from both the estate tax and the surviving spouse's creditors.
The Maryland Estate Planning Kit includes a dual-tax reference guide and asset inventory worksheet that helps identify which assets count toward the $5 million threshold and which transfer mechanisms can reduce the taxable estate.
Get Your Free Maryland — Estate Planning Checklist
Download the Maryland — Estate Planning Checklist — a printable guide with checklists, scripts, and action plans you can start using today.