The recently passed fiscal year 2025 budget for the State of Maryland includes a range of tax increases and policy decisions, but it appears that Maryland’s state’s inheritance and estate tax laws remain unchanged. Despite proposals from Governor Moore, no adjustments were made to the inheritance tax or estate tax exemption threshold. This decision carries important implications for families across the state—including those in Laurel, Columbia, and Annapolis—who are planning how to protect and transfer their wealth.
Inheritance Tax: No Structural or Rate Changes
Maryland is one of only five states that still imposes an inheritance tax, and it is the only state that imposes both an inheritance and an estate tax. The inheritance tax continues to apply at a 10% rate on assets left to individuals who are not close relatives. Immediate family members—including spouses, children, parents, grandparents, and siblings—remain exempt from this tax. However, nieces, nephews, cousins, friends, and unrelated beneficiaries are still be subject to the 10% inheritance tax. While Gov. Moore’s budget recommended finally doing away with this tax, the 2025 budget ultimately did not include a reform to bring Maryland in line the majority of states allowing inheritance to pass to any person without tax penalties.
Estate Tax Exemption Stays at $5 Million
Legislators rejected Gov. Moore’s recommendation to reduce Maryland’s estate tax exemption to $2 million, keeping it at its current level of $5 million for 2025. Estates exceeding this amount may still be taxed at rates of up to 16%. The proposed reduction would have brought many more families across Maryland within the scope of the estate tax, seriously complicating their estate planning. This state-level exemption is notably lower than the current federal estate tax exemption, which is over $13 million in 2025. The federal exemption is currently scheduled to drop significantly in 2026, which will depend on federal legislation this year. Proactive estate planning remains critical for residents in areas like Laurel, which is increasingly home to dual-income households and appreciating real estate.
What This Means for Maryland Families
Families should take note: while these tax rates haven’t changed, the burden of inheritance and estate taxes can still be significant without a well-crafted estate plan. Whether you’re passing down real estate, retirement accounts, or family businesses, planning with Maryland’s current tax environment in mind is crucial.
By taking steps now, you can ensure that your legacy reaches your loved ones as intended—without unexpected tax consequences.
Local Expertise from Downs Law Firm
At Downs Law Firm, we proudly serve families throughout Maryland, including Howard, Anne Arundel, Montgomery, and Prince George’s Counties. Our estate planning attorneys understand the unique challenges posed by Maryland’s inheritance and estate tax system and can guide you through effective strategies to reduce tax liability and protect your assets.
If you haven’t reviewed your estate plan recently—or if you’re just starting the process—now is the perfect time. Contact Downs Law Firm today to schedule a consultation and ensure your estate is fully prepared for the future.
