If you work in the Old Line State, your paycheck deductions can seem complex. They are a mandated combination of federal and state taxes, as well as unique local withholding. Understanding what is subtracted from your gross pay is the first step toward effective personal finance.
Here is a breakdown of the four main types of taxes withheld from a typical Maryland paycheck:
This is typically the largest deduction. The amount withheld from your paycheck is based on the information you provide on your W-4 Form (marital status, number of dependents, etc.). Your employer uses this to estimate your annual tax liability against the federal progressive tax brackets. The goal is to ensure you don't owe a massive bill (or get a huge refund) come April.
The Federal Insurance Contributions Act (FICA) funds Social Security and Medicare. These are flat percentage taxes applied to your gross earnings, and they are mandatory deductions for nearly all employees:
Note: An Additional Medicare Tax of 0.9% applies to wages over $200,000 for single filers, but the employer does not match this portion.
Maryland operates a progressive state income tax system, meaning the deduction rate increases as your total income increases. Rates range from 2.00% to 6.50% (the top rate applies to very high earners in 2025).
Your employer uses a formula and the information on your Form MW507 (Employee’s Maryland Withholding Exemption Certificate) to calculate the state withholding, aiming to approximate your final tax obligation to the state.
This is the unique Maryland deduction. All of Maryland's 23 counties and the city of Baltimore impose a local income tax, which is withheld along with the state tax.
Want to see exactly how much tax should come out of your Maryland paycheck — and whether your withholding is on track? Watter CPA can review your pay stubs and help you fine-tune your take-home pay. Contact us today for dedicated support.
