Maryland payroll taxes will catch you off guard if you've only run payroll in another state. You're not just withholding state income tax — you're also withholding a separate county-level "piggyback" tax that varies by where your employee lives, not where your business sits. Get the wrong county rate and you've under-withheld from day one, paycheck after paycheck.
- Maryland is the only state where every county AND Baltimore City levies its own piggyback income tax on top of the state rate — you must withhold both.
- State income tax rates run 2%–5.75%; local/county rates add another 2.25%–3.20% on top.
- SUTA is administered by DLLR with a 2026 taxable wage base of approximately $8,500 and a new employer rate near 2.3%.
- Maryland's FAMLI Paid Family Leave program began collecting contributions in 2026 — most small employers still haven't registered.
- Collect a completed MW507 from every employee — it's the only way to know which county rate applies.
Maryland's Two-Layer Tax Problem (State + County)
Most payroll guides stop at the state income tax bracket and move on. Maryland doesn't allow that luxury. The state runs six income tax brackets — 2% on the first dollar of taxable income up to 5.75% on income above $250,000 for single filers. Manageable. What most guides skip entirely is what comes next: a local income tax that every Maryland county, plus Baltimore City, sets independently.
These local "piggyback" rates range from roughly 2.25% to 3.20% depending on where your employee lives. That spread is not a rounding error. For a $70,000 earner, the difference between Worcester County's 2.25% and Baltimore City's 3.20% is nearly $665 per year in withholding. Wrong county code, wrong deduction, every single payroll run.
The rule that surprises most employers: you withhold based on where the employee lives, not where your business is located. A Montgomery County commuter driving to your Frederick office? You withhold Montgomery County's rate. That's exactly why collecting a properly completed MW507 from every new hire isn't optional — it's how you get the right county on record.
| County / City | Local Rate | Combined Top Rate (approx.) |
|---|---|---|
| Baltimore City | 3.20% | 8.95% |
| Montgomery County | 3.20% | 8.95% |
| Prince George's County | 3.20% | 8.95% |
| Howard County | 3.20% | 8.95% |
| Harford County | 3.06% | 8.81% |
| Baltimore County | 2.83% | 8.58% |
| Anne Arundel County | 2.81% | 8.56% |
| Frederick County | 2.96% | 8.71% |
| Worcester County | 2.25% | 8.00% |
Rates published by the Maryland Comptroller. Verify current figures at bFile.Maryland.gov before each payroll year — counties can and do adjust rates annually.
Register for withholding at bFile.Maryland.gov before your first payroll run. You'll receive a Central Registration Number and immediate access to the online filing system. There is no grace period.
Other Maryland Employer Tax Obligations in 2026
Four more obligations sit on top of income tax withholding. Here they are in the order you'll set them up:
Maryland's FAMLI program began collecting contributions in 2026 — and most small employers don't know they need to register. Businesses with fewer than 15 employees may have modified contribution obligations, but registration is still required. Check the Maryland Department of Labor's FAMLI portal for your specific rate tier before your next payroll run.
Filing Thresholds & When to Deposit Maryland Withholding
The Maryland Comptroller assigns your filing frequency based on how much withholding you remit. Three tiers:
- Quarterly filers — Total withholding under $700 per quarter. Most micro-businesses with 1–5 employees land here.
- Monthly filers — Withholding between $700 and $6,000 per month. Typical for a 5–20 person operation.
- Accelerated filers — Withholding above $6,000 per month. Rare under 10 employees.
"Most Maryland employers with 1–10 employees file quarterly — but your frequency is assigned by the Comptroller after your first payroll, not chosen by you. Confirm it before you assume."
All state withholding returns and payments go through bFile.Maryland.gov. One portal, one step — filing and ACH payment together. Set up your account immediately after receiving your Central Registration Number.
Filing on the wrong schedule — monthly when you're assigned quarterly — triggers unnecessary notices. Confirm your threshold with the Comptroller after your first payroll run, then set a calendar reminder to recheck it each January.
Quick-Start Checklist: Maryland Payroll Setup
- Register with the Maryland Comptroller for a withholding account at bFile.Maryland.gov
- Register with DLLR for Unemployment Insurance (SUTA) via the BEACON online portal
- Enroll in Maryland FAMLI through the Maryland Department of Labor — non-negotiable in 2026
- Collect a completed MW507 from every employee before their first paycheck — this determines the correct county withholding rate
- Report each new hire within 20 days to the Maryland Directory of New Hires at mdnewhire.com
A five-person Rockville landscaper — representative of the small employers we hear from constantly — ran six months of payroll withholding only the state rate, missing Montgomery County's 3.20% local tax entirely. Catching the gap mid-year meant corrected W-2s and uncomfortable conversations about adjusted deductions. The MW507 fix takes five minutes. The cleanup takes considerably longer.
If you're handling payroll for a small business in Maryland for the first time, the county layer is genuinely the hardest part — but it's mechanical once you have the right county code per employee and a payroll system that tracks current rates.
Frequently Asked Questions
What is the Maryland local income tax rate?
Maryland local income tax rates range from roughly 2.25% to 3.20% depending on the county where your employee lives. Baltimore City sets its own rate at 3.20%. Employers withhold the correct county rate based on the employee's home address — which is exactly why the MW507 is mandatory, not optional.
Does Maryland have Paid Family Leave in 2026?
Yes. Maryland's Family and Medical Leave Insurance (FAMLI) program began collecting contributions in 2026, with qualifying employees eligible for benefits. Both employers and employees contribute. Employers with fewer than 15 employees may face modified obligations — check the Maryland Department of Labor's FAMLI portal for your specific tier and registration steps.
How do I register for Maryland payroll taxes?
Register for state income tax withholding through the Maryland Comptroller at bFile.Maryland.gov. Register for Unemployment Insurance (SUTA) through DLLR's BEACON portal. File new hire reports separately at mdnewhire.com. All three are free and completed online. Budget about an hour total — and do it before payroll week one.
Not sure how much to withhold for your Maryland employees?
Calculate Your Maryland Payroll Taxes Free →The Bottom Line
Bottom Line
Maryland payroll taxes aren't complicated — they're just layered. Federal withholding, Social Security, and Medicare follow the same rules as every other state. What makes Maryland distinct is the mandatory county income tax withheld at the state level, plus FAMLI contributions starting in 2026.
- Collect a completed MW507 from every employee before first paycheck
- Withhold based on the employee's county of residence, not where they work
- Register with both the Maryland Comptroller (income tax) and DLLR BEACON (SUTA) before running payroll
- Account for FAMLI contributions for employers with 15+ employees
- File new hire reports within 20 days of each hire at mdnewhire.com
Get the county tax right and the rest falls into place. A reliable pay stub generator handles the math automatically — so your employees always see an accurate breakdown of exactly what was withheld and why.