Payroll Tax in Maryland: Complete Guide 2026
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Payroll Tax in Maryland: Complete Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Maryland’s payroll tax system is uniquely complex because it layers state income tax, county income tax (called the “piggyback” tax), and the state’s mandatory Paid Family and Medical Leave (PFML) program — known as the Time to Care Act — on top of standard unemployment insurance and federal FICA obligations. Maryland is one of the few states where employees face both state and local income tax withholding from every paycheck, making payroll administration more demanding than in most states.
Maryland Payroll Tax Rates (2026)
| Tax | Rate | Paid By | Wage Base |
|---|---|---|---|
| State Income Tax Withholding | ~2.00% to ~5.75% (graduated) | Employer withholds from employee | All taxable wages |
| County Income Tax (piggyback) | ~2.25% to ~3.20% | Employer withholds from employee | All taxable wages |
| State Unemployment Insurance (SUI) | ~0.3% to ~7.5% | Employer | First ~$8,500 per employee |
| PFML (Time to Care Act) | ~0.90% total | Employer (~0.45%) + Employee (~0.45%) | Social Security wage base (~$168,600) |
| Federal FICA — Social Security | ~6.2% each | Employer + Employee | First ~$168,600 |
| Federal FICA — Medicare | ~1.45% each | Employer + Employee | No cap |
| Additional Medicare (high earners) | ~0.9% | Employee only | Wages over ~$200,000 |
Maryland’s ~23 counties and Baltimore City each set their own piggyback tax rate, so the combined state-plus-county withholding rate varies by employee residence. The most common county rates range from approximately ~2.83% to ~3.20%.
How Maryland Payroll Tax Works
State Income Tax Withholding
Maryland’s graduated state income tax starts at approximately ~2.00% on the first ~$1,000 of taxable income and reaches approximately ~5.75% on income above ~$250,000. Employers use the employee’s Form MW507 to determine withholding. Maryland is one of the few states that requires a separate state withholding form and does not accept the federal W-4 for state purposes.
County Income Tax (Piggyback Tax)
Every Maryland county imposes a local income tax that is withheld by the employer alongside the state tax. Rates range from approximately ~2.25% (Worcester County) to ~3.20% (several counties including Howard, Montgomery, and Prince George’s). The withholding is based on the employee’s county of residence, not the county where the work is performed. If an employee does not file a Form MW507, the employer must withhold at the highest county rate of ~3.20%.
PFML — Time to Care Act
Maryland’s PFML program provides up to ~12 weeks of paid family and medical leave. The total premium rate is projected at approximately 0.90% of wages up to the Social Security wage base ($168,600). The cost is split between employer and employee: employers with ~15 or more employees pay approximately ~0.45%, and employees pay approximately ~0.45%. Employers with fewer than ~15 employees are not required to pay the employer share but must still withhold the employee portion. The maximum weekly benefit is projected at approximately ~$1,000.
State Unemployment Insurance (SUI)
Employers pay SUI on the first approximately ~$8,500 of each employee’s annual wages, one of the lower taxable wage bases in the country. New employers receive a standard rate of approximately ~2.3%. Experience-rated employers see rates ranging from approximately ~0.3% to ~7.5%, depending on their claims history and the overall trust fund status.
Comparison to Neighboring States
| Metric | Maryland | Virginia | Pennsylvania | Delaware | National Avg. |
|---|---|---|---|---|---|
| State income tax top rate | ~5.75% | ~5.75% | Flat ~3.07% | ~6.60% | Varies |
| County/local income tax | ~2.25%—~3.20% | None | ~1%—~3.87% (local EIT) | None | Varies |
| SUI taxable wage base | ~$8,500 | ~$8,000 | ~$10,000 | ~$10,500 | ~$16,000 |
| PFML premium | ~0.90% (shared) | None | None | None | ~0.4% |
| Est. total employer cost per ~$50K employee | ~$5,700 | ~$4,200 | ~$4,500 | ~$4,600 | ~$4,300 |
Maryland’s combination of state income tax, county piggyback tax, and PFML premiums creates one of the highest payroll cost environments on the East Coast.
Tips for Minimizing Payroll Tax Burden
- Use the correct county withholding rate. Applying the wrong county rate triggers under-withholding penalties. Verify each employee’s county of residence on Form MW507.
- Leverage the PFML small-employer exemption. Employers with fewer than ~15 employees are exempt from the employer share of PFML premiums, saving approximately ~0.45% of covered payroll.
- Manage SUI experience ratings. Although Maryland’s ~$8,500 wage base is low, the maximum rate of ~7.5% is high. Contest improper claims and invest in employee retention.
- Default to the highest county rate when necessary. If an employee does not provide a MW507, withhold at ~3.20% to avoid penalties, then adjust when the form is received.
- File electronically through Maryland’s bFile system. Electronic filing reduces errors for income tax withholding and provides confirmation of timely submission.
- Monitor PFML benefit coordination. Employers with qualifying private leave plans may apply for an exemption from the state PFML program if their plan meets or exceeds the state program’s benefits.
- Budget for the dual state-county withholding. Combined effective rates of ~8% to ~9% on wages (state plus county) mean cash flow planning must account for higher withholding deposits.
Key Takeaways
- Maryland’s graduated state income tax ranges from ~2.00% to ~5.75%, plus a county piggyback tax of ~2.25% to ~3.20% based on employee residence
- PFML premiums total approximately ~0.90% of wages up to the Social Security wage base, split equally between employer and employee for employers with ~15 or more workers
- SUI rates range from ~0.3% to ~7.5% on the first approximately ~$8,500 of each employee’s wages
- Employers with fewer than ~15 employees are exempt from the employer share of PFML premiums
- The county piggyback tax makes Maryland one of the few states with mandatory local income tax withholding from every paycheck
- Estimated total employer cost per ~$50,000 employee is approximately ~$5,700
Next Steps
- See the full state picture at Taxes in Maryland: State Tax Guide 2026
- Compare state tax burdens at State Income Tax Rates Comparison 2026
- Learn about federal payroll obligations in the Self-Employment Tax Guide
- Calculate your federal bracket with the Tax Bracket Calculator 2026
- Get local help: Find a CPA Near You