Maryland stands as one of the few states where beneficiaries might receive a generous gift and still owe tax on it. The reason is the Maryland inheritance tax—a charge applied not to the estate itself. It should be noted that it is applied to the recipient of the inherited assets. And it does not spare smaller gifts either.
It comes down to relationship. The inheritance tax in Maryland applies only to non-exempt beneficiaries in general. The ones presented below pay no tax on what they receive:
Anyone else? Most likely taxed.
For these non-exempt parties, the tax is set at 10% of the value inherited. No brackets, no scaling. Ten percent is ten percent—even if the amount inherited is modest.
The tax applies to nearly all types of assets passed down. Common examples include:
If someone leaves a vacation home to a niece or a lump sum to a friend, that is subject to inheritance tax unless an exemption applies. There is no dollar-based threshold that protects small inheritances—one of the less-known Maryland inheritance tax laws.
Inheritance tax should not be confused with the Maryland estate tax. It should be acknowledged that these are two separate obligations. The estate tax—in accordance with the total estate value—is paid by the estate itself before assets are distributed. The inheritance tax, however, is paid by the individual who receives the asset.
In line with the size and structure of the estate, both taxes might apply at the same time. For larger estates, federal inheritance tax thresholds may also step in, though these currently only apply to estates valued at $13.99 million or more (2025).
Yes—but it takes advance planning. A Maryland inheritance tax accountant would recommend legal approaches as outlined below:
If you are not sure about inheritance tax applications in Maryland, Watter CPA presents expert assistance.
