Maryland’s 2025 Budget Brings Major Tax Changes for Individuals and Businesses

Maryland Governor Signs 2025 Budget: What You Need to Know

On May 27, 2025, Maryland Governor Wes Moore signed the Budget Reconciliation and Financing Act of 2025 (Ch. 604, H.B. 352) into law. The legislation introduces sweeping changes to the state’s tax code, impacting individuals, businesses, and consumers alike.

Here’s a breakdown of the key provisions and what they mean for Maryland taxpayers.

🔍 Personal Income Tax Changes

Effective July 1, 2025 (for tax years beginning after December 31, 2024), there will be two new top tax brackets added, raising the top marginal rate from 5.75% to 6.5%.

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• Capital gains surtax: A 2% surtax applies to certain net capital gains.
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• County tax cap increase: Counties may now impose up to 3.3% (up from 3.2%) on Maryland taxable income.
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• Deductions and credits:
  • • Itemized deductions phased out for higher-income earners.
  • • Standard deduction increased.
  • • Child tax credit begins to phase out for those with federal AGI over $15,000.

🏢 Corporate Income Tax Update

Starting in tax year 2026, Maryland will fully apportion each resident member’s distributive or pro rata share of income from pass-through entities to the state.

🛍️ Sales and Use Tax Adjustments

Effective July 1, 2025, and into fiscal year 2026:

• • Adult-use cannabis: Sales tax increases from 9% to 12%.
• • New tax on services: A 3% sales tax applies to data and IT services.
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• Repealed exemptions:
  • • Snack food sold via vending machines.
  • • Photographic and artistic materials used in publications.
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📌 What This Means for You

These changes reflect Maryland’s efforts to modernize its tax system and increase revenue for public services. While higher-income individuals and certain businesses may see increased tax burdens, others may benefit from expanded deductions and credits.

✅ Next Steps

• • Review your tax strategy with a professional before the changes take effect.
• • Stay informed about additional guidance from the Maryland Comptroller’s Office.
• • Subscribe to our newsletter for updates on tax policy and financial planning tips.

Need help navigating these changes?
📞 Contact our office at 443-406-6441 or 📧 info@alltaxaccounting.com to schedule a consultation today.