Maryland Taxes on Pensions IRAs and 401ks – Maryland offers a mix of tax benefits and liabilities for retirees. The state does not tax Social Security benefits, provides a valuable pension exclusion for many employer-sponsored plans, but fully taxes traditional IRA withdrawals. Understanding how Maryland taxes pensions, IRAs, and 401(k)s helps retirees plan effectively, minimize their state tax bill, and avoid surprises during tax filing.
This guide uses the latest official information from the Maryland Comptroller’s Office (current as of 2026 tax guidance) and focuses on Maryland residents. Always consult a tax professional or the Maryland Comptroller for your specific situation, as rules can depend on filing status, age, disability, and income sources.
Does Maryland Tax Social Security Benefits?
No. Maryland fully exempts Social Security retirement benefits (and Railroad Retirement benefits under the U.S. Railroad Retirement Act) from state income tax—even if a portion is taxable on your federal return.
You report any federally taxable Social Security on Maryland Form 502, line 11, as a subtraction. This makes Maryland more retiree-friendly than states that tax Social Security.
Maryland Pension Taxes: What You Need to Know
Maryland taxes most traditional pension income at the state level (in addition to federal taxes), but qualifying retirees can claim a significant pension exclusion.
Eligibility for the pension exclusion:
- You (or your spouse) must be age 65 or older or totally and permanently disabled on the last day of the tax year.
- The income must come from an “employee retirement system” and be included in your federal adjusted gross income (AGI).
Qualifying plans include:
- Defined benefit and defined contribution pension plans
- 401(a) plans
- 401(k) plans
- 403(b) plans
- 457(b) plans
Maximum exclusion amount: $41,200 per person for tax year 2025 (the most recent published figure; the amount is indexed annually to the maximum Social Security benefit and typically increases each year).
Important offset: The exclusion is reduced dollar-for-dollar by any Social Security or Railroad Retirement benefits you receive (even the nontaxable portion). If your total Social Security/Railroad benefits exceed the maximum exclusion, your pension exclusion drops to zero. Use the official Pension Exclusion Computation Worksheet (13A) in the Maryland resident tax booklet to calculate it.
Public safety retirees (e.g., law enforcement, firefighters) and certain military retirees may qualify for additional or separate subtractions.
How Maryland Taxes 401(k) Distributions?
Distributions from traditional 401(k), 403(b), and 457(b) plans are generally taxable in Maryland, just like pensions. However, if you meet the age or disability requirements above, these distributions qualify for the pension exclusion (up to the $41,200 maximum, subject to the Social Security offset).
Roth 401(k) qualified distributions (after age 59½ and 5-year holding period) are entirely tax-free at both federal and Maryland levels.
Key tip: Rolling a 401(k) into a traditional IRA before retirement can disqualify future distributions from the pension exclusion, potentially increasing your Maryland tax bill.
Maryland IRA Taxes: Traditional, Roth, SEP, and Rollover IRAs
Traditional IRA withdrawals (including rollover and SEP-IRAs) are fully taxable in Maryland and do not qualify for the pension exclusion.
This is one of the biggest differences compared to 401(k) or pension income. Required minimum distributions (RMDs) from traditional IRAs are subject to Maryland state income tax (plus federal tax) starting at age 73 (or later under current rules).
Roth IRA qualified distributions remain tax-free in Maryland. Qualified Charitable Distributions (QCDs) from traditional IRAs can help reduce taxable income.
Note on potential 2026+ changes: Legislation such as House Bill 707 (introduced in 2026) proposed expanding the pension exclusion to include IRAs and phasing in 100% exclusion by 2028. As of April 2026, this bill has not been enacted into law, so current rules apply. Check the Maryland General Assembly site or Comptroller updates for the latest.
Maryland State and Local Income Tax Rates for Retirees (2025–2026)
Maryland uses graduated state income tax rates plus a local (county) tax. Rates effective for tax year 2025 (filed in 2026) and continuing into 2026 include new higher brackets:
State tax rates (Married Filing Jointly / Head of Household):
- 2.00% on first $1,000
- Up to 4.75% on income $3,001–$150,000
- 5.00%–6.50% on higher brackets (new 6.25% and 6.50% brackets apply above $600,000)
Local county tax: Additional 2.25%–3.30% depending on your county of residence (e.g., Baltimore County 3.20%, Worcester 2.25%).
Nonresidents pay a special 2.25% nonresident rate plus any applicable state tax.
Seniors also receive:
- An extra $1,000 personal exemption per person age 65+
- Higher filing thresholds before a return is required
How to Claim the Pension Exclusion and Other Retirement Tax Benefits?
- File Maryland Form 502 (Resident Individual Income Tax Return).
- Complete the Pension Exclusion Computation Worksheet (13A) from Instruction 13.
- Enter the result on line 10a of Form 502.
- Report Social Security subtractions on line 11.
- Claim additional senior exemptions on Form 502B.
Download the latest Maryland resident tax booklet and worksheets directly from the Maryland Comptroller’s website for the most current forms.
Retirement Tax Planning Tips for Maryland Residents
- Maximize the pension exclusion: Keep 401(k) and pension distributions separate from IRA rollovers if possible.
- Consider Roth conversions: Pay taxes now to make future distributions tax-free (and avoid the pension exclusion limitation).
- Use QCDs: Tax-free IRA transfers to charity (up to annual limits) reduce Maryland taxable income.
- Coordinate with federal taxes: Maryland starts from federal AGI with modifications—track all retirement income carefully.
- Estate and inheritance taxes: Maryland is one of the few states with both; plan accordingly for large retirement accounts.
- Monitor legislative changes: Proposed expansions to the pension exclusion could make IRAs more tax-advantaged in coming years.
Final Thoughts on Maryland Retirement Taxes
Maryland provides meaningful relief through the Social Security exemption and pension exclusion (up to $41,200+ for qualifying seniors), but traditional IRA and certain other retirement distributions remain fully taxable. Retirees with significant 401(k) or pension income often fare better tax-wise than those relying heavily on IRAs.
For the most accurate and up-to-date information, visit the official Maryland Comptroller’s Taxpayer Services pages or consult a qualified tax advisor familiar with Maryland retirement rules. Tax laws and your personal situation can change—proactive planning is the best way to keep more of your hard-earned retirement savings.
Sources: Maryland Comptroller’s Office (Pension Exclusion KB0010012, Seniors FAQ KB0010124, and 2026 Tax Filing updates). All figures current as of 2025–2026 tax guidance.