It’s Tax Day and many Maryland families might be shocked by unexpected payments. Middle-class households are especially affected. Your income may be too high to qualify for tax breaks but not high enough to absorb a surprise payment.
Planning for taxes isn’t just about filing on time. It’s about understanding what you owe, setting funds aside, and making smart financial choices throughout the year.
This guide will help you get ahead with Maryland-specific tax data, planning tips, and practical steps you can take now to reduce your tax burden for 2025.
Understand Maryland’s tax structure
Maryland residents face multiple layers of taxation. The two with the largest influence on your budget are state and local income taxes. These directly impact your take-home pay.
Maryland is one of the few states where residents pay both state and local taxes. The state uses a progressive system: the more you earn, the higher your rate.
Additionally, each county or city adds its own local income tax rate. Combined, these rates often exceed 8% of your income.
The table below shows state income tax brackets for joint filers. The local income taxes are added to these rates based on your county or city of residence.
Taxable income | State tax rate |
Up to $1,000 | 2% |
$1,001 – $2,000 | 3% |
$2,001 – $3,000 | 4% |
$3,001 – $100,000 | 4.75% |
$100,001 – $125,000 | 5% |
$125,001 – $150,000 | 5.25% |
$150,001 – $250,000 | 5.5% |
Over $250,000 | 5.75% |
Local tax by jurisdiction
Where you live in Maryland also makes a big difference. Urban jurisdictions like Montgomery County and Baltimore City tend to have higher local tax rates while rural localities like Worcester or Garrett Counties have lower rates. Here are the local tax rates for a few of Maryland’s localities.
County/City | Local income tax rate |
3.20 | |
3.20% | |
3.20% | |
2.7% – 3.2% based on income level | |
3.20% | |
3.20% |
Why middle-class families feel the pinch
Middle-income families often fall into a tough spot. You may not qualify for large tax credits, but you still face:
- High combined state and local tax rates.
- Rising costs for housing, childcare, and healthcare.
- Limited deductions and credits due to income level.
Without careful planning, tax bills can disrupt your budget or delay financial goals like saving for a home, paying down debt, or building emergency savings.
Stay ahead with smart tax planning
Here are a few small steps you can take to help you avoid surprises at tax time.
- Know your total tax rate: Combine your state and local rates to understand your total tax impact.
- Adjust your withholding: Use the IRS Withholding Estimator to see if you’re on track for a payment or return. Update your W-4 if your income, household size, or deductions change.
- Automate tax savings: Set up a dedicated savings account for taxes. Transfer a fixed amount each month based on your estimated tax rate.
- Track deductions all year: Keep receipts and records for eligible expenses like childcare, education, and charitable giving.
- Revisit after major life changes: A new job, move, or added income should trigger a tax plan review.
Other ways to save on your taxes
Reducing your taxable income is one of the best ways to decrease the taxes you pay. These options have additional benefits for you beyond lowering your taxes.
Contribute to your IRA
Traditional IRAs are personal retirement accounts that reduce your pre-tax income by allowing you to deduct your contributions from your taxable income. You do not pay taxes on this money until it is distributed to you.
There are multiple benefits of an IRA.
- They reduce your taxable income: By reducing the amount of income on which you pay taxes, you decrease what you owe to the IRS.
- You may qualify for tax credits: Contributing to your IRA may qualify you for a “retirement savings contribution credit” based on your contributions, filing status, and adjusted gross income.
- Tax-free growth: IRA investment dividends, capital gains, and interest growth is also tax-free.
Sign up for a 401(k) account
Many employers offer 401(k) benefits which allow employees to contribute a part of their paycheck to their 401(k) account. Similar to an IRA, these contributions are tax-deferred and lower your taxable income.
The differences between a 401k and an IRA are:
- A 401(k) is employee-sponsored
- Some employers match 401(k) contributions
- 401(k)s have higher annual contribution limits
- Investment options are more limited with a 401(k)
Start an HSA
An HSA is a tax-advantaged personal savings account that you can use for eligible medical expenses like deductibles, copays, coinsurance, and some over-the-counter medications.
HSA funds roll over from year to year and can gain interest over time, making them an ideal nest egg for medical costs into your retirement. Contributions, earnings, and withdrawals are tax free, and you’ll be creating a medical fund that can stay with you into the future.
Let’s build your tax strategy together
Tax planning isn’t just for high earners, it’s a key part of financial wellness for all Maryland families. The earlier you plan, the more options you have and the less likely you are to be surprised come tax time.
At SECU, we’re here to help you make informed choices that protect your budget and support your goals.
Our member advisors can help you:
- Review your tax withholding.
- Create a savings plan for future tax bills.
- Set up a tax-specific savings account.
- Understand how your location affects your tax obligations.
Schedule your free financial wellness checkup today. We’ll help you stay ready, reduce surprises, and build confidence in your financial plan.
