Withholding Taxes: Maryland
The below content should be reviewed in conjunction with the in-depth federal coverage of this topic provided above.
Author: Vicki M. Lambert, The Payroll Advisor
- Maryland residents who work in a state that does not have a reciprocal withholding agreement with Maryland are subject to tax in the work state at that state's rate. Nonresidents who work in Maryland, or derive income from a Maryland source, are subject to Maryland income tax withholding as well as the special nonresident tax rate of 1.25 percent. However, nonresidents are not subject to Maryland income tax withholding on compensation for personal services performed in Maryland if their state of residence has a reciprocal exemption in place for Maryland residents working in the other state. See Withholding on Residents, Nonresidents and Expatriates.
- When hired, employees must complete and submit to their employer Form MW507, Employee's Maryland Withholding Exemption Certificate. The spouse of a military servicemember may be exempt from Maryland income tax withholding on income from services performed in Maryland if certain conditions apply. See Employee's Withholding Allowance Certificate.
- A special withholding rate applies to payments of supplemental wages, such as bonuses. See Supplemental Wages.
- Employers must provide federal Form W-2, Wage and Tax Statement, to each employee annually. In addition, employers must provide electronic or written notice to employees who may be eligible for the state Earned Income Tax Credit. See Form W-2 Requirements; Earned Income Tax Credit Notices.
- Employers must keep all records pertaining to the payment of wages and the deduction and withholding of Maryland income tax for at least three years. See Recordkeeping Requirements.
- In addition to withholding for state income tax, Maryland employers also must withhold for county income taxes. All counties in Maryland, and Baltimore, impose a county income tax. See Local Payroll Taxes.