Maryland Estate Tax and Inheritance Tax 2026: Who Owes Which

Who owes which tax

Maryland’s two death taxes work on opposite sides of the transfer. The estate tax is imposed on the transfer of the Maryland estate of a resident, or of a nonresident whose estate includes Maryland real property or tangible personal property with a Maryland situs (7-302). The inheritance tax is imposed on “the privilege of receiving property that passes from a decedent and has a taxable situs in the State” (7-202). Same death, two returns, two agencies: the Comptroller for the estate tax and the Register of Wills in the county for the inheritance tax.

The surprise for readers who know our New Jersey page and Pennsylvania page is the sibling: New Jersey taxes a sister at 11% to 16% and Pennsylvania at 12%, while Maryland’s statute lists a brother or sister among the exempt recipients. Maryland’s weight falls on the next generation sideways: nieces, nephews and everyone who is not family. The state’s estate tax is closer to our Illinois and Washington pages, with a $5,000,000 exclusion between them.

The inheritance tax: 10% of what a non-exempt heir receives

The rate is a single one: “The inheritance tax rate is 10% of the clear value of the property that passes from a decedent,” and “clear value” means fair market value minus expenses (7-204). There is no bracket, no exempt first slice and no discount we could find in the sections we read, apart from the all-or-nothing rule that “if the total value of the property does not exceed $1,000” to any one person, no tax applies (7-203(g)). Our reading: at $1,001 the whole amount is taxed ($100.10), because the statute is a threshold and not a deduction.

What counts as “property that passes from a decedent” is wider than a will. It includes property passing by will or intestacy, property in which the decedent was a joint tenant, and lifetime transfers made in contemplation of death, a final disposition of a material part of the property within two years before death (unless shown not to be in contemplation of death), transfers that take effect at death, and transfers where the decedent kept dominion such as a power of revocation (7-201(d)). That is a two-year rule, shorter than New Jersey’s three.

The practical timing is looser than for the estate tax. In a formal administration, the person responsible pays when the register determines the amount due, when the personal representative accounts for distribution (7-217(a)); the register of wills in the county where the court sits determines the tax (7-214(a)). There is no “month nine” on the inheritance tax in the sections we read, but there is one on the estate tax, and the two meet in the credit below. If paying on the due date would force the sale of a small business (25 or fewer employees), the Comptroller may allow a payment plan of up to five years (7-218).

The estate tax: $5,000,000, plus a late spouse’s unused exclusion

Maryland’s estate tax is built on the old federal state-death-tax credit. The statute says the exclusion for deaths on or after January 1, 2019 is “$5,000,000 for a decedent dying on or after January 1, 2019, plus any deceased spousal unused exclusion amount” (7-309(b)(3)(i)). The federal figure is $15,000,000 for 2026 (see our estate tax exemption page), so a Maryland resident with $6,000,000 owes nothing federally and something to Maryland.

How the number is computed, and why the 16% limit decides

Two statutory steps give the tax. First, “the Maryland estate tax is the amount, if any, by which the federal credit exceeds the total of death taxes other than the Maryland estate tax” that the state imposed and that were paid out of the Maryland estate (7-304(b)(1)). The credit is the maximum credit for state death taxes under section 2011 of the Internal Revenue Code as it stood before repeal, reduced by the share of the estate outside Maryland (7-304(a)). Second, because the section 2011 credit no longer exists, “the federal credit used to determine the Maryland estate tax may not exceed 16% of the amount by which the decedent's taxable estate” exceeds the exclusion (7-309(b)(3)(iii)). The deduction for state death taxes under section 2058 is not allowed (7-309(b)(3)(ii)).

The section 2011 table is a graduated schedule on the “adjusted taxable estate,” meaning the taxable estate “reduced by $60,000,” topping out at “$1,082,800 plus 16% of the excess over $10,040,000.” We ran that table against the 16% limit for every taxable estate from $5,000,000 to $40,000,000. The table credit is higher than the limit at every size, by at least $266,800 (our arithmetic), so the limit is what sets the tax: 16% of the taxable estate above the exclusion, with no cliff and no lower bracket. That is our reading of the statute and not a rate printed anywhere; the Comptroller’s MET-1 worksheet is the form that decides, and the Register of Wills tip sheet describes the same cap.

The table is our arithmetic: 16% of the taxable estate above $5,000,000, assuming the whole estate is in Maryland, no inheritance tax credit and a taxable estate (after the marital and charitable deductions, not the gross estate). It is the gross tax before the inheritance credit below. The Department of Legislative Services describes the same shape: a Maryland unified credit of $1,945,800 that “effectively excludes the first $5.0 million of the taxable estate,” and a top marginal rate of 16% on the section 2011 table. The marginal rate is a flat 16% on the slice above the line, so the average rate climbs slowly toward it.

Two notes on the edges. First, property outside Maryland reduces the credit by the proportion of the estate not in the Maryland estate (7-304(a)); how the 16% limit is prorated is a MET-1 worksheet question we did not verify. Second, up to $5,000,000 of qualified agricultural property passing to a qualified recipient can be excluded, with recapture if farming stops within 10 years (7-309(c)).

Portability, and the return you must file to get it

Maryland’s statute defines the deceased spousal unused exclusion amount as the applicable exclusion of the last predeceased spouse reduced by that spouse’s taxable estate (7-309(b)(9)(i)). For a spouse who died on or after January 1, 2019 it can be used only if “a Maryland estate tax return is timely filed for the last predeceased spouse,” with an irrevocable election (7-309(b)(9)(ii)). The return can be filed solely to make the election, within the time a federal portability election would have (7-305(c)). Our credit shelter and QTIP page shows how that compares with states that have no portability.

Our arithmetic: the first spouse dies with a $2,000,000 taxable estate, so $3,000,000 of exclusion is unused. If the survivor’s taxable estate is $9,000,000 and the election was made, the exclusion is $8,000,000 and the gross tax is 16% of $1,000,000, $160,000. Without it, the exclusion is $5,000,000 and the gross tax is $640,000.

The credit between the two taxes: why “both” rarely means “add”

The Register of Wills’ tip sheet states it in two sentences: “The inheritance tax paid to the Register of Wills is subtracted from the gross Maryland estate tax liability and the difference is the Maryland estate tax due.” and, if the inheritance tax paid equals or exceeds the credit, no Maryland estate tax is due. The Department of Legislative Services says the same of the estate tax: estates get a credit for Maryland inheritance tax paid. The tip sheet is the Rev. 10/18 edition, which we read through the Internet Archive; the statute behind it (7-304(b)(1)) is current in the 2026 session text.

One timing trap comes with it. The estate tax is owed on the nine-month date until the inheritance tax is actually paid, and the tip sheet cites a Maryland court case on this: if less inheritance tax has been paid by the due date than the gross estate tax, interest or a penalty (up to 10%) runs on the shortfall until the inheritance tax covers it. So an estate with a large estate tax and a slow inheritance tax determination should pay the estate tax on time and claim the credit later.

That table is our arithmetic, ignoring expenses, and it shows the pattern: the total is whichever tax is larger, not the sum, up to the point where the heirs’ inheritance tax passes the estate tax. For this estate that point is $3,200,000 going to non-exempt heirs. Above it, every extra dollar to a nephew costs 10 cents and the estate tax is already gone; below it, leaving the nephew more costs nothing extra in total, because the inheritance tax just replaces estate tax the estate would have paid anyway. Who ends up bearing it is another matter: the estate tax is apportioned among all persons interested in the estate unless the will says otherwise (7-308), whereas the inheritance tax is the recipient’s own.

Worked examples (our arithmetic)

• A niece inherits a $500,000 rental from an unmarried aunt who had $900,000 in total. No estate tax (under $5,000,000). Inheritance tax: 10% of $500,000 = $50,000, before expenses. If the same rental went to the aunt’s sister, the tax would be $0.
• A Maryland house held jointly by a decedent and a friend, worth $600,000. The decedent’s interest is $600,000 divided by two joint tenants, $300,000 (7-209(a)); the friend pays 10%, $30,000, unless the deed provides otherwise. Our tenants in common vs joint tenancy page covers how the title is chosen.
• A friend receives $1,000 and then $1,001. The first is under the threshold and pays nothing; the second, in our reading, pays $100.10.
• A Florida resident dies owning an $800,000 Maryland rental left to a niece. The statute taxes property with a Maryland situs (7-202), and Maryland real property is the case 7-203(f) does not exempt, so our reading is $80,000; whether a Maryland estate tax return is also required turns on the federal gross estate against $5,000,000 (7-305(b)). We did not read the section that defines taxable situs.
• A $7,000,000 estate, $4,500,000 to two children and $2,500,000 to a nephew. Inheritance tax $250,000; gross estate tax $320,000; net estate tax $70,000; total $320,000.

For the heirs, the larger question is liquidity: fund units that cannot be redeemed quickly, a rental, and an IRA can leave an estate with a bill and no cash. Our page on death and disability repurchase terms shows which non-traded funds buy shares back from an estate, our inherited IRA page covers the income tax on withdrawals, which is separate, and the step-up in basis page explains why a rental’s date-of-death value matters for both taxes.

Maryland real estate and fund holders: what changes

Maryland real estate owned by someone who lives elsewhere. The estate tax reaches a nonresident’s estate when it includes real property permanently located in Maryland (7-302(2)), and the inheritance tax applies to property with a Maryland situs. The statute’s reciprocal exemption covers personal property, not real property or tangible property in the state (7-203(f), 7-303). A Maryland rental or vacation home is therefore the usual way a non-resident’s heirs meet the Maryland inheritance tax.

Fund shares, LLC interests and REIT units. For a Maryland resident they are personal property and pass like any asset; for a nonresident, our reading is that they fall inside the reciprocal exemption if the decedent’s state of residence imposes no death tax on similar property of a Maryland resident. The statute leaves the test to that state’s law “on the date of the decedent’s death,” so a decedent from a state with its own estate or inheritance tax needs a lawyer’s reading.

Value and cash. The inheritance tax runs on the appraised inventory value and on the estate tax side the value must be based on a certified appraisal, according to the tip sheet. For an illiquid fund interest the nearest figure is the sponsor’s last published NAV on the date of death, with the usual caveat that it may not be what a buyer pays.

What changed in 2026, and what did not

We found no enacted change. The statutory figures are the ones in the 2026 session text of the Tax-General Article. SB 211 (2026), introduced by Senator Folden, would have repealed the estate tax for decedents dying on or after July 1, 2026; the Department of Legislative Services estimated the revenue loss at $44.0 million in fiscal 2027, $182.5 million in fiscal 2028 and $193.8 million in fiscal 2031 (the annual figure is, in effect, the estate tax’s forecast revenue). The bill page we read lists a Senate hearing on January 21, 2026 and no later action. The Comptroller’s own pages load only through a script in our tests, so we could not read the current MET-1 instructions; the tip sheet we used is the Register of Wills’ Rev. 10/18 edition, and the statute text is the 2026 session text. Anyone relying on a repeal or a changed exclusion should check the General Assembly’s bill page and the Comptroller’s MET-1 first.

Decision points: what an executor or heir has to settle

1. Is the taxable estate over $5,000,000, or $5,000,000 plus a carried-over amount? If a spouse died on or after January 1, 2019 and no Maryland return was filed for them, the carryover may be lost.
2. Which heirs are on the exempt list? A sibling is exempt, a niece is not, and an unmarried partner is exempt only if registered, or for the jointly held primary residence with the affidavit.
3. Does the inheritance tax cover the estate tax? If the non-exempt shares carry 10% at least equal to the gross estate tax, no estate tax is due, but the Comptroller’s interest runs until it is actually paid.
4. Who bears each tax? The will’s tax apportionment clause decides who carries the estate tax; the inheritance tax is the recipient’s.
5. Where does the cash come from? The estate tax return and payment are due nine months after death, an extension to file does not extend the time to pay, and the Comptroller may allow an alternative payment schedule (7-307); the inheritance tax is due at accounting.

An estate attorney prepares the returns, and a financial adviser can weigh the liquidity plan against the heirs’ own finances, which is the part no form does.

This is analysis of public documents, not investment, legal or tax advice.

What a reader can do with this

• List each heir against the exempt classes first. Spouse, children and descendants, parents, grandparents, siblings and a child’s spouse owe no inheritance tax; nieces, nephews, cousins, friends and unmarried partners owe 10%.
• Compare the larger of the two taxes, not the sum. Take 16% of the taxable estate above $5,000,000 and 10% of what the non-exempt heirs receive; the total is roughly the larger one, before expenses.
• Check the title on every shared asset. A joint-tenancy house passes at the whole value divided by the number of joint tenants including the decedent.
• Read the beneficiary forms. Life insurance named to a person is exempt; an IRA named to a nephew is, in our reading, taxed at 10%.
• If a spouse died on or after January 1, 2019, check that a Maryland estate tax return was filed with the election, because the survivor’s exclusion depends on it.
• Calendar month nine for the estate tax return and payment with the Comptroller, and ask the Register of Wills for the inheritance tax determination early so the credit can be certified.

FAQ

Sources, read and saved on October 21, 2026: Maryland Code, Tax-General sections 7-201, 7-202, 7-203, 7-204, 7-207, 7-208, 7-209, 7-210, 7-211, 7-214, 7-215, 7-216, 7-217, 7-218, 7-219 to 7-221, 7-301 to 7-308 and 7-309 (2026 Regular Session statute text, mgaleg.maryland.gov); Register of Wills (registers.maryland.gov), “What you need to know about Maryland’s estate tax,” Rev. 10/18, through the Internet Archive; Maryland Department of Legislative Services fiscal and policy note for Senate Bill 211 (2026, First Reader) and the SB 211 bill page; and 26 U.S.C. 2011 as it read before repeal (Cornell Legal Information Institute, Internet Archive copy). We could not load the Comptroller’s MET-1 instructions or estate tax pages, and we did not read the sections defining taxable situs or the discount and interest rules for the inheritance tax. Estate tax tables, shares and worked examples are our arithmetic, with the assumptions stated. This is analysis of public documents, not investment, legal or tax advice.