Maryland leaves your Social Security and Railroad Retirement benefits alone. The rest of your retirement income is taxable, but a Pension Exclusion can shield a large chunk of it if you are 65 or older, totally disabled, or married to someone who is totally disabled.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf You do not have to reach 65 to claim it. The Maryland retirement income tax falls on pensions, 401(k), and IRA income at state rates from 2% to 6.5%, plus a county tax between 2.25% and 3.30% on top for tax year 2025.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf
This guide explains what Maryland taxes, how the Pension Exclusion works, and why the county piece matters.
Maryland Retirement Income Tax at a Glance
Here is how Maryland handles each common source of retirement income.
| Income source | How Maryland treats it |
|---|---|
| Social Security and Railroad Retirement | Not taxed. |
| Pensions (employment-related) | Taxable, but eligible for the Pension Exclusion. |
| 401(k), 401(a), 403(b) and 457(b) withdrawals | Taxable, but eligible for the Pension Exclusion. |
| Traditional IRA, SEP and Keogh withdrawals | Taxed at 2% to 6.5% state, plus county. Do not qualify for the Pension Exclusion. |
| Senior exclusion | Pension Exclusion up to $41,200 (tax year 2025; $40,600 for 2026) if you are 65+, totally disabled, or have a totally disabled spouse, reduced by Social Security and Railroad Retirement received. |
Social Security is fully exempt in Maryland, and so is Railroad Retirement. The state does not tax any portion of either benefit.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf It reaches you free of state and county income tax.
Pensions, 401(k) distributions, and IRA withdrawals are taxable. The Pension Exclusion can shield a large slice of qualifying pension and retirement-plan income, but it does not cover everything. A traditional IRA, Roth IRA, SEP or Keogh does not qualify at all,marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf and the exclusion shrinks for people who collect Social Security. The details decide how much you actually save.
Maryland Retirement Income Tax: How It Works
Maryland has a graduated state income tax that starts at 2.00% on the first $1,000 of taxable income and reaches 6.50% on income above $1,200,001.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf On top of that, local officials set a local income tax, which ranged between 2.25% and 3.30% for tax year 2025.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf So your true rate is the state rate plus your local rate. That county layer is easy to forget and it raises the real cost of a taxable withdrawal.
The relief built for retirees is the Pension Exclusion. For tax year 2025, it lets qualifying taxpayers exclude up to $41,200 of eligible pension and retirement-plan income, a figure that steps down to $40,600 for tax year 2026.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf There are three ways to qualify, and only one of them involves your age: you are 65 or older, or you are totally disabled, or your spouse is totally disabled.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf Those are alternatives, not a checklist. If you have not reached 65, do not stop reading. The Comptroller of Maryland publishes the current figure and the worksheet that computes it, and the worksheet instructions carry the exact age and disability requirements.
But there is a catch that surprises people. The exclusion is reduced by the amount of Social Security or Railroad Retirement benefits you receive.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf The more Social Security you collect, the smaller your Pension Exclusion gets. And if your Social Security exceeds that maximum, the exclusion drops all the way to zero.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf
That design matters. The worksheet subtracts your Social Security from the maximum exclusion before anything else, so the pension break is offset against the benefit the state already leaves untaxed. Retirees with large Social Security benefits get little or no Pension Exclusion. Retirees with modest Social Security and a sizable pension benefit the most.
This is the opposite of what many retirees expect. A bigger Social Security check feels like good news, and it is for your budget. But it quietly shrinks the Pension Exclusion, so the state tax break narrows as your Social Security grows. The two move in opposite directions by design. Knowing that lets you read your own situation correctly instead of assuming the full $41,200 is yours.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf
Work an example. Say you are 67 in tax year 2025 and receive $15,000 in Social Security and $30,000 from a pension. Your starting Pension Exclusion of $41,200 is reduced by the $15,000 in Social Security, leaving a $26,200 exclusion.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf That covers $26,200 of your $30,000 pension and leaves $3,800 taxable. These figures are illustrative, not a prediction of your own return.
What the Exclusion Covers
The Pension Exclusion applies to eligible employment-related pension and qualifying retirement-plan income: qualified defined benefit and defined contribution pension plans, 401(a) plans, 401(k) plans, 403(b) plans and 457(b) plans. A traditional IRA, a Roth IRA, a simplified employee plan (SEP), a Keogh plan or an ineligible deferred compensation plan does not qualify at all.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf So 401(k) distributions above what the exclusion absorbs are taxed at Maryland's state rate plus your county rate, and traditional IRA withdrawals are taxed at those rates with no exclusion to draw on.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf
So the order of operations is: total your eligible retirement income, apply the Pension Exclusion reduced by your Social Security, and tax whatever is left at the combined state-and-county rate. The Comptroller of Maryland provides the Pension Exclusion Computation Worksheet (13A) that runs this calculation on your return.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf
Required minimum distributions (RMDs) count as ordinary taxable retirement income, and one taken from a qualifying plan such as a 401(k) can draw on the Pension Exclusion like any other qualifying payout. An RMD from a traditional IRA cannot.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf Maryland also has retirement-income subtractions that sit outside the Pension Exclusion entirely: military retirement income and public-safety retirement income are subtracted separately, and the worksheet explicitly tells you not to include either amount in the Pension Exclusion computation.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf If you receive military or public-safety retirement pay, ask the Comptroller or a tax professional what those separate subtractions are worth before you file, because they are not part of the $41,200 figure on this page.
The County Tax Nobody Mentions
Maryland's county income tax is the piece that catches retirees off guard. It is not a flat statewide add-on. Local officials set the rates, which ranged between 2.25% and 3.30% for tax year 2025, and that rate stacks on top of the state's 2% to 6.5%.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf
That means a $50,000 taxable IRA withdrawal costs more in a high-county-rate jurisdiction than a low one, even though the state rate is identical.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf When you budget a withdrawal to pay for care, use your combined rate, not just the state number. Otherwise you will under-budget the tax.
The county tax follows where you live, not where the account is held. If a move is on the table for care reasons, the destination county's rate is part of the comparison.
What This Means for Paying for Care
If you are drawing on retirement savings to pay for senior care, Maryland's layered rates and the Pension Exclusion both shape your bill.
A large IRA or 401(k) withdrawal is taxed at the state rate plus your county rate. For a 401(k), only the part covered by your Pension Exclusion escapes; a traditional IRA withdrawal gets no exclusion at all.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf A one-time spike can also push more income above the exclusion than a steady drawdown would.
Spreading withdrawals across tax years often keeps more income inside the exclusion and the lower state brackets. For the federal mechanics of these withdrawals, including the early-withdrawal penalty and required distributions, see our guide to using retirement accounts for care.
Because the Pension Exclusion interacts with your Social Security, the right withdrawal order is not obvious. Our guide to building a senior care funding plan covers sequencing income sources to keep the tax low. If you are just beginning, start with how to pay for senior care.
A tax professional can run your Pension Exclusion against your Social Security and county rate before you withdraw. Given how the pieces interact, that is worth doing.
Where Maryland Stands for Retirees
Maryland is a mixed bag for retirees. The full Social Security exemption is a strong plus, and the Pension Exclusion is genuinely generous for the right retiree, up to $41,200 of shielded income.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf But two features pull the other way.
First, the exclusion is offset by Social Security.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf A retiree with a large Social Security benefit may see the Pension Exclusion shrink to nothing, which blunts the headline number. The break helps pension-heavy, Social-Security-light retirees most.
Second, the county income tax adds a second layer on every taxable dollar.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf Even with the exclusion, taxable retirement income carries both a state rate and a local rate of 2.25% to 3.30%. That combined rate is the number that actually hits your withdrawal.
The takeaway: Maryland rewards retirees whose income leans on a pension that fits inside the exclusion, and it costs more for those with large taxable withdrawals in a high-rate county. Knowing which group you fall into tells you what to expect, and where the planning effort pays off.
Frequently Asked Questions
Does Maryland tax Social Security benefits?
No. Maryland does not tax Social Security or Railroad Retirement benefits.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf Your benefit reaches you free of state and county income tax.
Do I have to be 65 to claim the Maryland Pension Exclusion?
No. There are three separate ways to qualify: you are 65 or older, or you are totally disabled, or your spouse is totally disabled.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf Meeting any one of them is enough, so a totally disabled taxpayer who has not reached 65 can still claim the exclusion.
How much is the Maryland Pension Exclusion?
Up to $41,200 for tax year 2025, dropping to $40,600 for tax year 2026, for taxpayers who are 65 or older, totally disabled, or whose spouse is totally disabled.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf The exclusion is reduced by the Social Security or Railroad Retirement benefits you receive, and it is zero if those benefits exceed the maximum exclusion.
Does Maryland have a county income tax on retirement income?
Yes. Local officials set a local income tax that stacks on top of the state's 2% to 6.5%, and those rates ranged between 2.25% and 3.30% for tax year 2025.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf Taxable retirement income, including IRA and 401(k) withdrawals, is subject to both.
Are IRA and 401(k) withdrawals taxed in Maryland?
Yes, but Maryland treats them differently. A 401(k) qualifies for the Pension Exclusion, so only the part above what the exclusion covers is taxed. A traditional IRA, Roth IRA, SEP or Keogh does not qualify for the exclusion at all.marylandcomptroller.gov. (2025). MD Comptroller - Pension Exclusion Computation Worksheet (13A): max $41,200, Social Security subtracted from the maximum, exclusion zero if SS exceeds it. Retrieved Aug 9, 2026, from https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/worksheets/Pension-Exclusion-Worksheet.pdf Whatever is taxable is taxed at Maryland's state rate plus your county rate.
Does Maryland tax Roth IRA withdrawals?
Maryland starts from your federal taxable income. Because qualified Roth IRA withdrawals are already excluded federally, they generally are not taxed again at the Maryland level. If you are unsure whether a distribution is qualified, check with the Comptroller or a tax professional before you file.
What if I moved to Maryland partway through the year?
Part-year residents generally owe Maryland tax only on income received while they were Maryland residents, prorated on the state's part-year return. The Comptroller's resident income tax instructions walk through the calculation.
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The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.