Maryland 2026 Tax Changes — What Residents & Business Owners Must Know
Beginning January 1, 2026, major federal tax changes will take effect as temporary provisions expire and updated rules continue.
Maryland residents — who already face both state and county-level income taxes — will feel these changes strongly because Maryland uses federal AGI as the foundation for state and local tax calculations.
These Changes Affect:
- W-2 earners across Baltimore, Silver Spring, Bethesda, Rockville, Columbia, Annapolis
- Federal employees, government contractors, and military families
- Healthcare professionals, educators, and public sector workers
- Business owners, LLCs, freelancers, and S-Corps
- Real estate investors, landlords, and STR hosts
- Families with children
- Retirees drawing IRA, pension, or investment income
- Dual-income households
Below is a full breakdown of how 2026 tax changes will impact Maryland residents.
Key Federal Changes Affecting Maryland Households
Standard Deduction Shrinks Significantly
Maryland taxpayers — especially in high-cost areas such as Montgomery County, Howard County, and Baltimore County — will feel this reduction acutely.
- federal taxable income
- Maryland taxable income
- Maryland county-level taxable income
Maryland homeowners and families will see noticeable changes.
Federal Tax Brackets Increase
- 12% → 15%
- 22% → 28%
- 24% → 31%
- dual-income families
- healthcare, tech, and federal employees
- workers in Baltimore, DC metro, and the I-270 corridor
- households earning between $80K–$350K
Maryland has a high concentration of families in these income ranges, amplifying the impact.
QBI (20% Business Deduction) Remains Federal; Maryland Does Not Conform
QBI continues federally but does not apply in Maryland state income tax calculations.
- Federal taxable income may decrease
- Maryland taxable income may not
- Business owners must plan for both systems
- consultants
- federal contractors
- real estate agents
- trades and independent contractors
- LLCs and S-Corps
- small service-based businesses
Child Tax Credit Shrinks
- Federal Child Tax Credit shrinks from about $2,000
- To roughly $1,000 per child
- Refundability decreases
Maryland families — especially in suburban counties — will see reduced refunds and higher taxable income.
Marriage Penalty Returns
Maryland has one of the highest concentrations of dual-income professional households in the U.S.
- couples are pushed into higher federal brackets sooner
- credit eligibility phases out faster
- taxable income increases both federally and at the Maryland state level
Couples earning $120K–$300K combined may see significant increases.
Maryland-Specific Tax Considerations
1. Maryland Uses Federal AGI for Both State and County Taxation
- smaller federal deductions
- higher federal brackets
- reduced credits
…will directly increase Maryland state tax and county tax.
- Montgomery
- Prince George’s
- Howard
- Baltimore County
- Anne Arundel
2. Real Estate Owners Face Important 2026 Shifts
- Montgomery County
- Anne Arundel
- Howard County
- Baltimore City
- Frederick
- Prince George’s
- capital gains increases
- depreciation changes
- tighter rental loss rules
- updated STR participation requirements
- timing of selling or refinancing property
Landlords and rental property owners must prepare.
3. Short-Term Rental (STR) Owners Will Face Stricter Rules
- Baltimore
- Annapolis
- National Harbor
- Ocean City
- Deep Creek Lake
- reduced bonus depreciation
- stricter participation documentation
- updated IRS safe harbor rules
- limitations on using losses against other income
4. Maryland Retirees Must Plan Around Federal Bracket Changes
- IRA withdrawals
- 401(k) distributions
- pension income
- taxable investment income
Higher federal brackets increase tax liabilities for retirees even if some Maryland benefits apply.
Who Is Hit Hardest in Maryland (2026)
- Dual-income households
- Federal employees & contractors
- Homeowners in high property-tax counties
- Business owners and contractors
- Real estate investors and landlords
- STR operators
- Families with children
- Retirees with taxable IRA/401(k) income
- Middle-income and upper-middle-income earners
What Maryland Residents Should Do Before December 31, 2025
- Review federal, state, and county withholding
- Maximize retirement contributions
- Evaluate Roth conversions before bracket increases
- Review S-Corp/LLC structuring
- Organize STR and rental documentation
- Evaluate capital gains exposure
- Time property or investment sales carefully
- Build a comprehensive 2025–2026 federal + Maryland tax plan
Maryland 2026 Tax FAQ
Does Maryland conform to QBI?
No — QBI is federal-only.
Will state taxes increase?
Maryland tax rates don’t change, but taxable income will rise due to federal changes.
Are families affected?
Yes — child credit reductions and bracket increases impact refunds.
Are STR owners impacted?
Yes — depreciation and participation rules tighten.
Are retirees affected?
Yes — depreciation and participation rul Yes — federal bracket increases affect taxable withdrawals.es tighten.
Get a 2026 Maryland Tax Strategy
Maryland residents face meaningful tax changes in 2026 due to reduced deductions, higher federal brackets, shifting credit rules, and impacts on business owners, retirees, and real estate investors.
A personalized tax plan ensures you’re fully prepared before the new rules take effect.