Maryland Payroll Tax Guide (2026)

Maryland is the state where payroll gets personal. What you withhold depends on which of the 24 local jurisdictions your employee lives in, and 2026 adds two new top state brackets at 6.25 and 6.5% on high earners.^[3]

10 min read • Reviewed by Rajanikant Patel CPA • Verified Oct 1, 2026 • Sources: Comptroller, MD Labor, IRS

Quick Facts

Maryland payroll at a glance

Maryland employers withhold a graduated state income tax together with a county income tax in one combined amount, and pay unemployment insurance on the first $8,500 of each worker’s wages.^[3]

State income tax withholding

2.00%–6.50% ^[1]

UI taxable wage base

$8,500 per employee ^[3]

New employer UI rate

2.60% ^[3]

Experienced UI rate range

0.30%–7.50% ^[3]

Employee-paid state payroll tax

None ^[3]

Social Security wage base

$184,500 ^[2]

FUTA net rate

0.6% = $42 per employee ^[14]

State minimum wage

$15.00 per hour ^[10]

Local minimum wage ordinances

3 jurisdictions ^[10]

Highest local minimum wage

Montgomery County, $18.00 ^[10]

UI registration trigger

An employer is a person or governmental entity that employs at least one… ^[3]

Exempt salary threshold

$35,568 per year ^[13]

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What changed for Maryland payroll in 2026

Six items moved for Maryland employers this year. Anything below is what have changed since the 2025 tables, so a rate card carried over from last year will be wrong in at least one place.

Two new top state brackets UI stays on Table A FAMLI still not collecting Montgomery County to $18.00 Howard County to $16.00 Prince George’s County $15.30

The county rate follows the employee home, not the worksite: Maryland’s local income tax is set by the county or Baltimore City where the employee lives, not where your office sits, and it is withheld in the same payment as the state tax. Two people at the same desk doing the same job can need different withholding because one lives in Worcester County at 2.25% and the other in Kent County at 3.30%. Collect a fresh Form MW507 whenever someone moves.^[2]

Estimate

2026 Maryland payroll tax calculator

Enter one employee’s annual gross wages to see what the employer owes, what comes out of the paycheque, and the true cost of employment.

Maryland · 2026 rates · per employee, per calendar year

Annual gross wages ($)

Cash wages subject to payroll tax, before any withholding.

Your UI contribution rate

Your exact rate comes from Maryland Department of Labor, Division of Unemployment Insurance each year.

Custom UI rate (%)

FUTA basis

FUTA is 6.0% less a 5.4% credit where the state has no outstanding federal loan.

Employer pays

UI, on first $8,500–

FUTA, on first $7,000–

Social Security, 6.2%–

Medicare, 1.45%–

Employer payroll tax–

Withheld from the employee

Social Security, 6.2%–

Medicare, 1.45%–

Additional Medicare, 0.9% over $200,000–

Withheld from employee–

True cost of employment–

Employer tax as % of wages–

Total payroll tax, both sides–

State income tax withholding is not included above: it depends on the employee’s Form MW507, Employee’s Maryland Withholding Exemption Certificate and filing status, so it cannot be estimated from gross pay alone.

Rates & Nexus

Payroll tax rates & the nexus question

Maryland runs two state payroll taxes. The table below is the whole state layer for 2026.^[3]

The state payroll taxes

Tax	Paid by	2026 rate	Wage base
UI	Employer	0.30%–7.50%; 2.60% new	$8,500
Income tax withholding	Employee	2.00%–6.50%	No limit

Tax Table A, the lowest of Maryland’s rate tables, is in effect for 2026 and is the same table that applied in 2025. Out of state construction contractors are assigned the Maryland construction industry average instead, and never less than the new employer rate for that year.^[3]

Who has to register

An employer is a person or governmental entity that employs at least one individual within Maryland, and must register for a Maryland unemployment insurance account.^[3] Income tax withholding is administered separately by Comptroller of Maryland, so most employers end up with two state account numbers, not one.

Multistate and remote employees

When an employee works in more than one state, the four-part test below decides which state the wages are reported to. The tests run in order: you stop at the first one that gives an answer.

1. Localisation of service→
2. Base of operations→
3. Place of direction & control→
4. Employee’s residence

One remote employee is usually enough. A single person working from home in Maryland generally creates an obligation to register and report wages here, even if the business has no office, property or customers in the state.

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Compliance

Registration & return filing

Registration is online and free. The unemployment account and, where one exists, the withholding account are opened separately and carry different numbers.^[3]

How to register

Cross the wage threshold→
Maryland Unemployment Insurance Portal (BEACON)→
Receive account number→
File & deposit online

An employer is a person or governmental entity that employs at least one individual within Maryland, and must register for a Maryland unemployment insurance account.^[3]

Deposit schedule

Less than $250 of withholding for the year files annually, less than $700 per quarter files quarterly, and more than $700 in any quarter moves the employer to monthly. Employers with $15,000 or more of withholding in the prior year are accelerated filers and must remit within three business days once $700 has accumulated.^[1]

Returns, reports & due dates

Form	What it is	Due
Quarterly contribution and employment report, filed electronically in BEACON	Quarterly unemployment return	April 30, July 31, October 31, January 31
Form MW506, Employer’s Return of Income Tax Withheld, is filed for each period. Form…	Income tax withholding returns	Less than $250 of withholding for the year files annually, less th
Annual reconciliation	Year-end withholding reconciliation	January 31
Form 941	Federal quarterly return	Last day of the month after quarter end
Form 940	Federal unemployment, annual	January 31
New hire report	Report of newly hired employees	Within 20 days of start date

Quarterly unemployment returns are due April 30, July 31, October 31, January 31. A return filed one day late is delinquent, and in most states the penalty attaches to the return, not the payment.^[3]

Pricing

Payroll Pricing

Simple, transparent pricing, no setup fees, no year-end surprises. One flat charge per pay run.

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Line items the big providers quietly bill for

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Setup fee

one-time onboarding

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Every payroll run

each pay cycle

billed
extra

Off-cycle payroll

corrections & bonuses

billed
extra

Year-end filings

W-2s, 1099s & more

billed
extra

All you actually pay

Per employee, per pay run

$6 /emp

Plus a flat $40 minimum per pay run. That’s the whole bill.

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Wage Base

Subject wages vs. exempt payments

Not every dollar an employee receives is a taxable wage. The split below governs what goes into the unemployment wage base and what is reported at year end.^[3]

Subject wages

Salaries, hourly pay, overtime and piece rates
Commissions, bonuses and incentive pay
Most cash tips reported by the employee
Vacation, holiday and paid sick leave when taken as wages
Severance and payments in lieu of notice
The cash value of meals and lodging provided as compensation
Employer contributions to a non-qualified deferred compensation plan

Not subject

Reimbursements of genuine business expenses under an accountable plan
Employer contributions to a qualified retirement plan
Employer-paid premiums for accident and health insurance
Most third-party sick pay after the sixth calendar month
Payments to a genuine independent contractor
Workers compensation benefits

The wage base is per employer, per year, not per job. If you hire someone in August who already earned $8,500 elsewhere, your unemployment clock still starts at zero. The one exception is a successor employer taking over an existing payroll, who inherits the wages already paid.

Reference

Glossary of key terms

Taxable wage base: The slice of each employee’s annual pay that unemployment tax is calculated on. In Maryland that is $8,500 for 2026. Earnings above it are still wages, they are simply no longer taxed for unemployment.
Experience rating: The method Maryland Department of Labor, Division of Unemployment Insurance uses to set each employer’s own unemployment rate from its history of claims. Employers with fewer charged claims move down the schedule; those with more move up.
New employer rate: The rate assigned before an employer has enough history to be experience rated. It normally applies for two to three years, then the account moves onto the experience schedule.
Form MW507, Employee’s Maryland Withholding Exemption Certificate: The state withholding certificate. It sets how much income tax comes out of each cheque and is filed with the employer, not with Comptroller of Maryland.
Reserve account: The running balance of contributions an employer has paid in, less the benefits charged against it. The ratio of that balance to taxable payroll is what drives the assigned rate.
Successor employer: A business that acquires another’s payroll may inherit both its experience rate and the wages already paid toward the wage base for the year. Getting this wrong is a common acquisition error.
Localisation of service: The first of four tests deciding which state a multistate employee’s wages are reported to. If substantially all the work is in one state, that state wins and the remaining tests are never reached.
FUTA credit reduction: A reduction in the 5.4% federal unemployment credit applied to states that have carried an outstanding federal loan for two or more consecutive Januaries. It raises the effective FUTA rate and is settled each November.
Supplemental wages: Bonuses, commissions, awards and similar payments made outside the regular payroll cycle. Many states set a separate flat withholding rate for them.
Local withholding: Income or occupational tax levied by a city, county or school district and withheld by the employer alongside state tax. It is assessed separately from the state layer.

Federal, State & Local

Maryland payroll tax, layer by layer

Federal tax applies everywhere and is the larger number. The state layer is what changes when you cross a border.

Layer 1: Federal

Tax	Rate	2026 base
Social Security	6.2% each side	$184,500
Medicare	1.45% each side	No limit
Additional Medicare	0.9% employee only	Over $200,000
FUTA, standard	0.6% net	$7,000
Federal income tax	Per Form W-4	No limit

Maryland has no FUTA credit reduction for 2026, so the standard 0.6% net rate applies, $42 per employee. The final list is not published until 10 November 2026.^[14]

Layer 2: State

Tax	Rate	2026 base
UI, new employer	2.60%	$8,500
UI, experienced	0.30%–7.50%	$8,500
Income tax, standard	2.00%–6.50%	No limit

Layer 3, county & city: a real third layer

Every Maryland county and Baltimore City levies a local income tax that the employer withholds together with the state tax as a single combined amount, based on the employee’s Maryland county of residence rather than where the work is performed. For 2026 the local rates run from 2.25% in Worcester County to 3.30% in Dorchester and Kent counties, and Anne Arundel and Frederick counties apply graduated local rates that change with income and filing status. Employees who are not Maryland residents have no county tax withheld and instead use the nonresident tables, which build in a special 2.25% nonresident rate.^[2]

The state minimum wage is $15.00 an hour, effective 2024-01-01. The tipped cash wage is $3.63. 3 local jurisdictions set a higher floor. The highest is Montgomery County at $18.00. Montgomery County, Howard County and Prince George’s County set their own higher minimum wages. Effective July 1, 2026 Montgomery County pays $18.00 for employers with 51 or more employees, $16.50 for 11 to 50 employees and $15.95 for 10 or fewer. Howard County is $16.00 for all employers from July 1, 2026, and Prince George’s County is $15.30 from January 1, 2026. Montgomery County adjusts its rates each July 1 to reflect the Washington, Arlington and Alexandria regional consumer price index.^[10]

Overtime exemption is a separate test. A salaried employee is exempt from overtime only above $35,568 a year ($684.00 a week) federal FLSA, and only if the duties test is also met. Paying a salary is not by itself enough.^[13]

FAQ

Maryland payroll FAQs

Use the rate for the Maryland county or Baltimore City where the employee resides, not where the work is performed. For 2026 the local rates run from 2.25% in Worcester County to 3.30% in Dorchester and Kent counties, and Anne Arundel and Frederick counties apply graduated local rates that vary with income and filing status. The employee reports the county of residence on Form MW507.

Nonresidents have no county income tax withheld. You use the Maryland nonresident tables instead, which include a special 2.25% nonresident rate in place of a local rate. The 2026 Maryland employer withholding guide publishes separate nonresident percentage method tables.

No. Maryland’s FAMLI program has been delayed again and payroll contributions are now scheduled to begin January 1, 2027, with the first quarterly remittance due in April 2027 and benefits following in 2028. Nothing should be withheld or remitted for FAMLI on 2026 payrolls.

Maryland is on Tax Table A for 2026, so contributory employer rates run from 0.30% to 7.50% on the first $8,500 of wages. New employers generally pay 2.60%, which is about $221 per employee at the full wage base. Out of state construction contractors instead get the Maryland construction industry average, never lower than the new employer rate.

Maryland added two new top brackets. Single filers now pay 6.25% on taxable income over $500,000 and 6.5% over $1,000,000, while joint filers reach 6.25% over $600,000 and 6.5% over $1,200,000. The bottom of the schedule is unchanged at 2.00% on the first $1,000.

The statewide rate is $15.00 an hour for employers of every size, with a 3.63 dollar tipped cash wage that tips must top up to $15.00. Montgomery, Howard and Prince George’s counties set higher local rates and the higher rate always wins. From July 1, 2026 Montgomery County is $18.00 for employers with 51 or more employees and Howard County is $16.00.

$8,500 per employee per calendar year. Once an employee reaches that in wages from you, no further unemployment tax is due on that employee for the rest of the year. The count restarts on 1 January and does not carry over from a previous employer.

$15.00 an hour. 3 local jurisdictions set a higher rate, so check the rate for the location where the employee actually works. The tipped cash wage is $3.63.

April 30, July 31, October 31, January 31. A return is delinquent the day after the deadline even if the tax itself was paid on time, so file the return whether or not you can pay.

Verification

Sources & methodology

Methodology: every rate, threshold and due date on this page was taken from the administering agency’s own published material for the 2026 tax year, checked on Oct 1, 2026. Where a federal figure applies it comes from the IRS, SSA or US Department of Labor. 4 data points on this page could not be confirmed against a primary source and are either omitted or marked as not published, rather than estimated. Rates change, and some change mid-year, so confirm against your own rate notice before running a payroll.

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