If you’ve recently inherited money or property in Maryland, you might be wondering whether you’ll owe inheritance tax and how much. Unlike many states, Maryland is one of only six that still imposes an inheritance tax, and it applies to certain beneficiaries regardless of the estate’s size. Knowing how to calculate inheritance tax in Maryland helps you plan ahead, avoid surprises, and meet filing deadlines without stress.

Who pays inheritance tax in Maryland and who doesn’t?

Maryland’s inheritance tax falls on the person receiving the inheritance not the estate. But not everyone is taxed. Spouses, parents, children (including adopted and stepchildren), siblings, grandparents, and grandchildren are all exempt. So if your mother leaves you her house, no inheritance tax applies. But if your cousin inherits $50,000 from the same estate, they’ll owe tax at 10% the standard rate for non-exempt beneficiaries.

Charities and government entities are also exempt. Anyone outside those categories including friends, nieces/nephews (unless they’re also stepchildren), and domestic partners is subject to the tax.

How to calculate inheritance tax in Maryland: the basic formula

The calculation is straightforward: multiply the value of the inherited asset by the applicable tax rate.

  • Exempt beneficiaries: 0% tax
  • Non-exempt beneficiaries: 10% tax on the fair market value of the asset at the date of death

For example, if your aunt leaves you $120,000 in a brokerage account and you’re not exempt (say, you’re her niece), the tax is $12,000. The executor must file Form MET-1 and pay the tax before distributing assets. You won’t get the full $120,000 unless the estate covers the tax first or you pay it yourself after receiving the funds.

What counts as taxable value and when does valuation matter?

Taxable value is based on the asset’s fair market value on the date of death (or the alternate valuation date, if elected and allowed). For real estate, that usually means a recent appraisal. For stocks, it’s the closing price on the date of death. For bank accounts or retirement accounts, it’s the balance on that day.

Keep in mind: this is separate from capital gains tax later. If you sell inherited property for more than its date-of-death value, you may owe capital gains tax on the difference but that’s handled separately. You can read more about how capital gains tax works on inherited property in Maryland.

Common mistakes people make

One frequent error is assuming the estate tax and inheritance tax are the same. They’re not. Maryland has both: an estate tax that applies to larger estates (over $5 million in 2024), and an inheritance tax that applies to transfers to non-exempt people even small ones. Another mistake is waiting until after distribution to deal with the inheritance tax. The tax must be paid or arrangements made before assets are released.

Some beneficiaries also forget to report non-cash assets like jewelry or artwork. If the estate includes personal property passed directly to a non-exempt person, it’s still taxable at 10% of its appraised value.

Where to file and what forms you need

The executor files Form MET-1 with the Maryland Comptroller’s Office. If the estate also owes estate tax, additional forms like Form ET-312 may be required. You’ll find details on which Maryland estate tax forms are required during settlement. The filing deadline is nine months after the date of death but payment is due when the form is filed, not later.

What the executor needs to know

If you’re serving as executor, you’re responsible for identifying exempt vs. non-exempt beneficiaries, valuing assets, calculating tax, and filing MET-1. You’re also expected to collect or pay the tax before distributions. It’s not optional even if the beneficiary says they’ll handle it. Review the full list of tax responsibilities for Maryland estate executors to avoid missteps.

Next step: Get the numbers right before distribution

Gather date-of-death values for all assets going to non-exempt people. Confirm exemption status for each beneficiary using Maryland’s statutory list. Then apply the 10% rate to the taxable amount. If the estate is complex or includes business interests, trusts, or out-of-state property consider consulting a Maryland tax professional familiar with inheritance tax rules. You can also review the official guidance from the Maryland Comptroller’s Office.