Withholding Taxes: Maryland

Federal law and guidance on this subject should be reviewed together with this section.

Author: Vicki M. Lambert, The Payroll Advisor

Summary

• Income tax withholding rules differ depending on whether an employee is a Maryland resident, nonresident, or works for the employer in a state that does not have a reciprocal withholding agreement with Maryland. See Withholding on Residents, Nonresidents and Expatriates.
• When hired, all employees must complete and submit to their employer a state 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 Withholding Forms.
• A set 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 a certain number of years. See Recordkeeping Requirements.
• Baltimore and Maryland counties have requirements pertaining to income tax withholding. See Local Requirements.