What Is Maryland Payroll Tax?
Maryland payroll tax refers to the state and local payroll taxes that employers must withhold from employee wages or pay directly to state agencies. These taxes fund unemployment benefits and Maryland's state and county-level income tax systems.
Maryland's payroll tax system includes an employer-funded unemployment insurance tax and combined state and local income tax withholding. Maryland's 23 counties and Baltimore City levy local income tax, but unlike Kentucky's independently administered local occupational taxes, Maryland local income tax is administered centrally by the Comptroller of Maryland. For resident employees, the local portion is based on where the employee lives rather than where the employee works.
Most Maryland employers are responsible for the following payroll tax requirements:
- Unemployment Insurance (UI), administered by the Maryland Department of Labor
- Maryland State Income Tax withholding, administered by the Comptroller of Maryland using progressive state withholding schedules
- Local Income Tax withholding for residents of Maryland's 23 counties and Baltimore City, calculated through the state's combined withholding tables
Maryland Payroll Taxes at a Glance
| Payroll Tax | Paid By | Purpose |
|---|---|---|
| Unemployment Insurance (UI) | Employer | Provides temporary income for eligible unemployed workers |
| State Income Tax | Employee (withheld by employer) | Progressive state income tax withheld from employee wages |
| Local Income Tax | Employee (withheld by employer) | County or Baltimore City income tax based primarily on the employee's residence |
Understanding who pays each tax and that Maryland's local income tax is generally calculated according to the employee's county of residence rather than work location helps employers avoid one of the most common Maryland payroll mistakes: using the employer's location instead of the employee's home jurisdiction.
Maryland Employer Payroll Tax Responsibilities
Every employer with workers in Maryland has payroll tax responsibilities beyond simply issuing paychecks. Depending on your business, you'll generally need to:
- Register your business with the Maryland Department of Labor and the Comptroller of Maryland.
- Obtain a Maryland unemployment insurance account and a state withholding tax account.
- Collect a completed Maryland Form MW507 from each employee.
- Identify the Maryland county or Baltimore City jurisdiction where each resident employee lives.
- Withhold combined state and applicable local income tax from every paycheck.
- Pay employer UI contributions.
- File quarterly UI contribution and wage reports through the Maryland Unemployment Insurance Portal, commonly known as BEACON.
- File Maryland withholding returns and remit withheld state and local income taxes.
- Submit annual withholding reconciliation and W-2 information to the Comptroller of Maryland.
- Report every new hire and rehire to the Maryland State Directory of New Hires within 20 days.
- Prepare for Maryland Family and Medical Leave Insurance registration and payroll contributions beginning January 1, 2027.
- Maintain payroll records for state and local compliance.
Many businesses use payroll software with built-in Maryland county tax tables, since the correct combined withholding amount depends on the employee's filing information, exemptions, residency status, and county or Baltimore City residence.
Types of Maryland Payroll Taxes
Unemployment Insurance (UI)
Unemployment Insurance is an employer-funded payroll tax administered by the Maryland Department of Labor that provides temporary financial assistance to eligible workers who lose their jobs through no fault of their own.
Employers pay this tax directly it is never deducted from employee paychecks.
Maryland uses one of six unemployment insurance rate tables, identified as Tables A through F, depending on the condition of the state's Unemployment Insurance Trust Fund. Tax Table A, which contains the state's lowest rate range, is in effect for 2026.
Key Facts
- Paid entirely by employers Maryland has no employee UI contribution
- Calculated on the first $8,500 of each employee's wages for 2026
- New-employer rates generally range from 1.0% to 2.6%
- Experienced contributory-employer rates under 2026 Tax Table A range from 0.30% to 7.50%
- The standard rate is 7.50% and may apply when an employer fails to report taxable wages during the applicable fiscal-year period
- Certain government entities and nonprofit organizations may elect reimbursable status instead of paying regular quarterly contributions
- Most Maryland employers receive a federal FUTA tax credit of up to 5.4% for timely state UI payment, bringing the effective FUTA rate down to about 0.6%
- Must be reported quarterly through the Maryland Unemployment Insurance Portal, commonly known as BEACON
Maryland State Income Tax Withholding
Maryland imposes a progressive individual income tax, and employers calculate withholding using tables and percentage-method schedules issued by the Comptroller of Maryland. The calculation incorporates the employee's filing status, exemptions reported on Form MW507, pay frequency, wages, residency status, and applicable local tax jurisdiction.
Employers are responsible for:
- Withholding Maryland state income tax from taxable wages using current Comptroller withholding tables or percentage-method schedules
- Collecting Form MW507 from new employees and employees who change their withholding elections
- Including applicable county or Baltimore City tax in withholding for Maryland resident employees
- Reporting withholding to the Comptroller of Maryland
- Depositing withheld taxes on the filing and payment schedule assigned to the employer
- Filing periodic withholding returns and required annual reconciliation and W-2 information
Maryland has reciprocal personal income tax agreements with the District of Columbia, Pennsylvania, Virginia, and West Virginia. Residents of these jurisdictions who work in Maryland may generally claim exemption from Maryland withholding by submitting the applicable withholding exemption documentation. Maryland residents working in a reciprocal state generally remain subject to Maryland withholding rather than the work state's income tax.
Local Income Tax
Maryland's 23 counties and Baltimore City levy local income tax. Unlike local payroll taxes that require employers to register separately with multiple municipal revenue offices, Maryland's local income tax is incorporated into the state's withholding system and administered centrally by the Comptroller of Maryland.
Key rules employers need to know:
- All 23 Maryland counties and Baltimore City levy a local income tax
- Local income tax rates generally range from 2.25% to 3.30%, depending on the jurisdiction and, in certain counties, the employee's taxable-income level and filing status
- For Maryland residents, the applicable local tax is based on where the employee lives, not where the employee works
- Employers use combined Maryland state and local withholding tables for the employee's county or Baltimore City jurisdiction
- Some counties, including Anne Arundel and Frederick, use graduated local rates rather than one universal rate for every resident
- Nonresident employees generally do not pay a Maryland county tax but may be subject to Maryland's special nonresident tax at a rate tied to the lowest local rate
- Employers remit both the state and local portions to the Comptroller of Maryland rather than registering independently with each county
- Employees should update Form MW507 when they move from one Maryland county to another so the employer can apply the correct local withholding schedule
Because Maryland local income tax applies statewide and is based primarily on employee residence, employers should treat county-code verification as a standard part of onboarding every Maryland resident employee and update payroll records whenever an employee changes their home address.
Which Payroll Taxes Are Paid by Employers vs Employees?
| Tax | Employer Pays | Employee Pays |
|---|---|---|
| Unemployment Insurance (UI) | YES | NO |
| State Income Tax | NO | Withheld from wages using progressive state schedules |
| Local Income Tax | NO | Withheld from wages based primarily on county or Baltimore City residence |
Maryland places the entire unemployment tax burden on the employer, while both state and local income taxes are withheld from employee wages and remitted together through the state's withholding system.
Maryland Payroll Tax Rates for Employers
Understanding current Maryland payroll tax rates is essential for calculating payroll accurately. Because UI rates are employer-specific and Maryland local withholding varies by employee residence, employers should use their annual UI Experience Rate Notice and current Comptroller withholding tables rather than relying on a single statewide percentage.
Maryland Payroll Tax Rates at a Glance
| Payroll Tax | Who Pays | General Rate | Taxable Wage Base |
|---|---|---|---|
| Unemployment Insurance (UI) | Employer | New employers: generally 1.0%–2.6%. Experienced contributory employers under 2026 Tax Table A: 0.30%–7.50% | $8,500 for 2026 |
| State Income Tax | Employee | Progressive rates incorporated into Maryland's withholding tables and percentage-method schedules | Applies to taxable Maryland wages, with no UI-style annual wage cap |
| Local Income Tax | Employee | Generally 2.25%–3.30%, depending on county or Baltimore City residence and, in certain jurisdictions, taxable income and filing status | Applies to Maryland taxable income, with no UI-style annual wage cap |
According to the Maryland Department of Labor's official 2026 guidance, Tax Table A remains in effect, contributory-employer rates range from 0.30% to 7.50%, and unemployment insurance applies to the first $8,500 earned by each employee during the calendar year. New-employer rates may range from 1.0% to 2.6%, while certain out-of-state construction employers may receive a rate based on Maryland's construction-industry average.
Instead of memorizing a general rate, employers should review their annual Experience Rate Notice, verify each employee's county of residence, and confirm that payroll software reflects Maryland's current state and local withholding schedules.
Understanding Taxable Wages
Not every Maryland payroll tax applies to wages the same way. Depending on the tax involved, taxable wages may include:
- Hourly wages
- Salaries
- Bonuses
- Overtime pay
- Commissions
- Certain taxable fringe benefits
UI tax applies only to the first $8,500 of each employee's annual wages, while state and local income tax withholding generally applies more broadly to taxable wages without the same wage base cap. Understanding which wage rules and local schedules apply to each employee helps reduce calculation errors.
Maryland Payroll Tax Filing Deadlines
Meeting payroll tax deadlines is just as important as calculating taxes correctly. Late filings or payments can lead to penalties and interest charges.
Unemployment Insurance (Quarterly Wage Report)
| Reporting Quarter | Filing Deadline |
|---|---|
| January – March | April 30 |
| April – June | July 31 |
| July – September | October 31 |
| October – December | January 31 |
State Income Tax Withholding
Maryland withholding returns and payments may be due on an accelerated, monthly, quarterly, seasonal, or annual schedule, depending on the employer's withholding liability and account classification. Employers should follow the filing frequency assigned by the Comptroller of Maryland and submit withheld state and local income taxes by the applicable due date.
Local Income Tax
Maryland local income tax is not filed separately with each county or Baltimore City. Employers calculate the local portion through the appropriate combined withholding schedule and report and remit it to the Comptroller of Maryland together with state income tax withholding.
If a deadline falls on a weekend or state holiday, it generally moves to the next business day. Because withholding payment schedules can differ from quarterly unemployment reporting deadlines, employers should track each obligation independently.
How to Register for Maryland Payroll Taxes
Before paying employees, businesses typically need to register with the Maryland Department of Labor and the Comptroller of Maryland.
State registration: Employers register for Maryland unemployment insurance and withholding accounts through Maryland's Combined Registration Application and applicable state online systems. The Maryland Department of Labor administers unemployment insurance, while the Comptroller of Maryland administers state and local income tax withholding.
Local registration: Employers do not generally register separately with Maryland counties or Baltimore City for employee income tax withholding. Instead, they identify each resident employee's home jurisdiction and use the corresponding combined state and local withholding table issued by the Comptroller.
During registration, you'll generally need information such as:
- Legal business name
- Federal Employer Identification Number (EIN)
- Business entity type
- Business address and all Maryland work locations
- Owner or responsible party information
- Date employees first performed services in Maryland
- Estimated payroll information
How to File Maryland Payroll Taxes
Filing payroll taxes in Maryland involves managing unemployment insurance and combined state and local income tax withholding obligations in parallel. A typical filing process includes:
Step 1: Calculate Employee Wages
Determine each employee's gross wages, including regular pay, overtime, bonuses, commissions, and other taxable compensation.
Step 2: Determine Applicable Local Jurisdictions
For every Maryland resident employee, confirm the county or Baltimore City jurisdiction where the employee lives. For nonresidents, determine whether a reciprocal-state exemption or Maryland's special nonresident withholding calculation applies.
Step 3: Calculate Payroll Taxes
Determine your employer UI contribution based on your current Experience Rate Notice, and calculate employee withholding using the current combined Maryland state and local withholding schedule for the employee's residence and Form MW507 information.
Step 4: Withhold Employee Taxes
Deduct combined Maryland state and applicable local income tax from each paycheck. Apply reciprocal-state exemptions only when the employee has provided valid documentation.
Step 5: Pay Employer Contributions and Remit Withholding
Pay employer UI contributions through the Maryland Unemployment Insurance Portal and remit combined state and local income tax withholding to the Comptroller of Maryland.
Step 6: File Payroll Tax Returns
Submit quarterly UI contribution and wage reports through BEACON, periodic Maryland withholding returns according to the employer's assigned filing frequency, and required annual reconciliation and W-2 information.
Step 7: Maintain Payroll Records
Keep detailed payroll records, employee Form MW507 certificates, residency and county information, wage records, filed returns, and payment confirmations in case of future audits or compliance reviews.
Following a consistent payroll process helps reduce mistakes and makes year-end reporting significantly easier.
Frequently Asked Questions
Who is required to pay Maryland payroll taxes?
Most businesses that hire employees performing services in Maryland are required to register with the Maryland Department of Labor and the Comptroller of Maryland. Their responsibilities may include paying employer UI contributions, withholding state and applicable local income taxes, filing payroll tax returns, reporting employee wages, and maintaining payroll records.
What payroll taxes are employers responsible for in Maryland?
Maryland employers generally have responsibilities related to unemployment insurance, state income tax withholding, and local county or Baltimore City income tax withholding. UI is paid entirely by the employer, while state and local income taxes are withheld from employee wages.
How often do employers file Maryland payroll tax returns?
Unemployment insurance reports are filed quarterly through the Maryland Unemployment Insurance Portal. State and local withholding returns may be filed on an accelerated, monthly, quarterly, seasonal, or annual schedule, depending on the filing frequency assigned by the Comptroller of Maryland.
How do I register for Maryland payroll taxes?
Employers register for unemployment insurance and state withholding through Maryland's business registration systems and Combined Registration Application. Separate county registration is not generally required for employee income tax withholding because local tax is administered by the Comptroller of Maryland.
What happens if payroll taxes are filed late?
Late filings or payments may result in penalties, interest charges, or other compliance issues. Maryland charges interest on unpaid unemployment insurance balances, and late UI reports may also result in a separate penalty. Filing accurately and on time helps avoid unnecessary costs.
Does Maryland payroll tax apply to remote employees?
Yes. An employee who physically performs services from a Maryland location may create Maryland withholding and unemployment insurance obligations even when the employer is located in another state. For Maryland residents, the correct local income tax withholding generally depends on the employee's county or Baltimore City residence.
Are Maryland payroll tax rates the same every year?
Not always. Maryland's unemployment tax table can change based on the condition of the state's UI trust fund, and an employer's individual rate can change because of benefit charges and taxable payroll. State withholding schedules and county income tax rates can also change. Employers should review current Department of Labor and Comptroller guidance each year.
Can payroll software calculate Maryland payroll taxes automatically?
Many payroll platforms automatically calculate Maryland UI contributions and combined state and local income tax withholding, apply county-specific tables, and help employers meet filing deadlines. Employers are still responsible for ensuring employee Form MW507 information, home addresses, county codes, reciprocal-state documentation, and assigned UI rates are accurate and up to date.
Disclaimer
This article is for general informational purposes only and doesn't constitute legal, tax, or accounting advice. Payroll tax rates, wage bases, state withholding schedules, county income tax rates, filing requirements, and Maryland Family and Medical Leave Insurance implementation dates can change. Consult a qualified CPA or tax professional for guidance specific to your business.
