Maryland Estate and Inheritance Tax: What Couples Pay in 2025

Does Maryland tax estates and inheritances for married couples?

Yes, Maryland imposes both an estate tax and an inheritance tax on decedents' property, but a surviving spouse is exempt from both. That means when one spouse dies and leaves everything to the other, neither tax applies to that transfer.

Maryland's estate tax exemption is $5 million for decedents dying on or after January 1, 2019, and the inheritance tax is a flat 10% on the clear value of property passing to certain non-exempt beneficiaries. The tax bills typically come into play when assets pass to people outside the exempt family circle or when an estate's total value exceeds the $5 million threshold.

For most married couples, the immediate concern is not what you owe each other but what your heirs will owe after the second spouse dies. That's where exemption planning, portability, and beneficiary designations matter most.

Maryland estate tax vs. inheritance tax: how the two differ

The estate tax is paid by the estate itself before assets are distributed, while the inheritance tax is paid by the individual beneficiary who receives property. They are collected by different agencies and calculated differently, but Maryland provides a credit mechanism so the same property is not taxed twice.

The estate tax is administered by the Maryland Comptroller's Office, and the inheritance tax is collected by the Register of Wills in the county where the decedent lived or owned property. Any inheritance tax paid is subtracted from the gross Maryland estate tax liability. If the inheritance tax paid equals or exceeds the calculated estate tax, no additional estate tax is due.

This credit system means that if an estate owes both taxes, the inheritance tax payment reduces the estate tax bill dollar-for-dollar, up to the full estate tax liability.

Maryland estate tax exemption and rates for 2025

The Maryland estate tax exemption for 2025 is $5 million per individual, and it is not indexed for inflation. The top effective rate is capped at 16% of the amount by which the taxable estate exceeds the exemption.

Maryland decoupled from the federal estate tax exemption in 2018 (Chapters 15 and 21 of the 2018 legislative session). While the federal exemption for 2025 is $13.99 million per person, Maryland's exemption has been fixed at $5 million since January 1, 2019. A legislative effort (HB 1014 in the 2024 session) proposed conforming the Maryland exemption to the federal amount, but the bill did not pass into law, and the $5 million threshold remains in place.

A Maryland estate tax return must be filed if the federal gross estate, plus adjusted taxable gifts, plus any property for which a Maryland Qualified Terminal Interest Property (QTIP) election was previously made, equals or exceeds the $5 million exemption. The return and payment are due nine months after the decedent's date of death.

The estate tax rate is determined by reference to the credit for state death taxes under Internal Revenue Code § 2011. The credit used to calculate the Maryland estate tax cannot exceed 16% of the amount by which the decedent's taxable estate exceeds the exemption. In practice, rates start at around 0.8% and rise to the 16% cap on larger estates.

Is a spouse exempt from Maryland inheritance tax?

Yes, a surviving spouse is completely exempt from Maryland's 10% inheritance tax. Property passing to a spouse, whether by will, trust, joint ownership, or intestate succession, is not subject to the tax.

Beyond spouses, the following individuals are also exempt from the inheritance tax for decedents dying on or after July 1, 2000:

• Children (including stepchildren and adopted children)
• Parents
• Grandparents and grandchildren
• Siblings
• Spouses of children (sons-in-law, daughters-in-law)
• Other lineal descendants and ancestors

The 10% rate applies to collateral heirs and unrelated beneficiaries, including nieces, nephews, cousins, friends, domestic partners (who are not legally married), and any other non-lineal recipients.

Several additional exemptions apply regardless of the recipient's relationship:

• Property valued at $1,000 or less passing to any single person is exempt.
• Life insurance proceeds paid to a named beneficiary (other than the estate) are exempt.
• Property administered under a Small Estate proceeding is exempt.
• Bequests to qualifying 501(c)(3) organizations incorporated in Maryland or meeting related requirements are exempt.
• Real property subject to a perpetual conservation easement is exempt (effective October 1, 2019).

How portability works for married couples in Maryland

Since 2019, Maryland allows a surviving spouse to claim the deceased spouse's unused estate tax exemption, a concept known as portability. This means a married couple can potentially pass up to $10 million free of Maryland estate tax.

Here's how it works: when the first spouse dies, if their estate does not use the full $5 million exemption, the leftover amount (called the "deceased spousal unused exclusion amount") can be transferred to the surviving spouse. The surviving spouse must elect to claim this unused portion, typically by filing the appropriate Maryland estate tax return for the first spouse's estate.

Maryland also permits a separate state QTIP election. A QTIP trust allows a decedent to leave assets in trust for the surviving spouse's benefit during their lifetime, with the remainder going to other beneficiaries (often children) after the surviving spouse dies. By making a Maryland QTIP election, the estate defers state estate tax on that trust property until the second spouse's death. The QTIP property is then included in the surviving spouse's estate for Maryland estate tax purposes.

Example: Suppose a married couple has a combined estate worth $9 million. The first spouse dies in 2025 with $3 million in their name. Their estate uses $3 million of the $5 million exemption, leaving $2 million unused. The surviving spouse elects portability and now has an effective Maryland estate tax exemption of $7 million ($5 million of their own plus $2 million from the deceased spouse). When the surviving spouse later dies with a $6 million estate, only the amount exceeding the $7 million combined exemption would be subject to estate tax, which in this case would be nothing.

Without portability, the surviving spouse would have only a $5 million exemption, and $1 million of the $6 million estate would be taxable.

How to reduce Maryland estate and inheritance tax

Careful planning can significantly reduce or eliminate what your heirs owe. Here are the primary strategies Maryland couples use.

Maximize the marital deduction and portability. Property passing to a surviving spouse is fully deductible for both estate and inheritance tax purposes. Pairing this with a portability election ensures the first spouse's unused exemption isn't wasted. If your estate plan involves trusts, a Maryland QTIP election can defer estate tax to the second death while preserving the exemption.

Use lifetime gifting strategically. Maryland does not impose a separate state gift tax. However, Maryland's inheritance tax includes a two-year lookback: a material part of the decedent's property transferred within two years of death (other than a bona fide sale) in the nature of a final disposition may be subject to the inheritance tax as if it were still part of the estate. Gifts made more than two years before death generally fall outside this rule.

Leave property to direct-line heirs when possible. Since children, grandchildren, parents, and siblings are exempt from the 10% inheritance tax, structuring bequests to favor these recipients avoids the tax entirely. When you want to leave property to nieces, nephews, friends, or non-relatives, factor in the 10% cost.

Make charitable bequests to qualifying organizations. Property passing to a 501(c)(3) organization that meets Maryland's requirements (incorporated in Maryland or with a principal place of business in a reciprocal jurisdiction) is exempt from inheritance tax and can also reduce the taxable estate.

Consider agricultural land provisions. Maryland estate tax law includes special valuation rules for qualified agricultural property, which can lower the assessed value of farmland in the estate.

Consult a Maryland [estate planning attorney](https://meetneptune.com/estate-planning). For estates approaching or exceeding the $5 million threshold, or for couples with complex assets like business interests, real estate in multiple states, or blended family considerations, working with an attorney experienced in Maryland death taxes is important. Trust structures, beneficiary designations, and the interplay between federal and state rules all require tailored advice.

What to do next if you own property in Maryland

If you're a Maryland resident or a nonresident who owns real or tangible personal property in the state, these taxes may apply to your estate. Nonresidents are subject to the Maryland estate tax on property with a taxable situs in Maryland, and the inheritance tax applies to real property and tangible personal property located in the state.

Key deadlines and steps to keep in mind:

• The Maryland estate tax return and payment are due nine months after the date of death.
• The inheritance tax is assessed and collected by the Register of Wills during probate.
• The estate tax return is filed with the Comptroller of Maryland.
• Property valuations must be based on an appraisal from a Certified Appraiser.

For couples, the most valuable step you can take now is reviewing your estate plan together. Confirm that your wills, trusts, and beneficiary designations are aligned with current Maryland law. Make sure you understand whether a portability election or QTIP trust makes sense for your situation. And if your combined assets are within range of the $5 million exemption, talk with a qualified estate planning attorney or tax professional about strategies to minimize what your family will owe.