Maryland Estate Tax Laws for 2015
If you live in Maryland, then you live in one of a handful of states that still collect a state estate tax. In addition, Maryland is one of six states that collects a state inheritance tax (New Jersey is the only other state that collects both an estate tax and an inheritance tax.)
The estates of Maryland residents, as well as the estates of nonresidents who own real estate, tangible personal property, and/or one or more business entities located in Maryland, are subject to a state estate tax under the following guidelines for deaths occurring in 2015. Refer to Overview of Maryland Estate Taxes in 2014 and Prior Years for deaths occurring before 2015.
NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
For Maryland residents, an estate may be subject to the Maryland estate tax if the federal gross estate, plus adjusted taxable gifts, plus property for which a Maryland qualified terminal interest property (QTIP) election was previously made on a Maryland estate tax return filed for the estate of the decedent's predeceased spouse, equals or exceeds $1,500,000.
For nonresidents of Maryland, an estate may be subject to the Maryland estate tax if it includes real estate or tangible personal property having a taxable situs within the state of Maryland and the value of the federal gross estate equals or exceeds $1,500,000 under the criteria set forth above.
The estate representative must first complete a federal estate tax return, IRS Form 706, for the year of the decedent's death, even if the estate is not required to file the federal return. Once the federal return is completed, the estate representative can prepare the Maryland Estate Tax Return, Form MET-1.
Outright transfers to a surviving spouse are not taxable.
For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Maryland estate tax may be due on the B Trust as a result of a gap between the Maryland exemption and the federal exemption. In 2015, that gap is estimated to be $3,920,000. Nonetheless, a married decedent's estate can make a Maryland-only election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP Trust" for short) for purposes of calculating the Maryland estate tax. Thus, since there will be a gap between the Maryland exemption and the federal exemption and a state-only QTIP election is allowed, married Maryland residents can defer payment of both Maryland and federal estate taxes until after the surviving spouse's death using ABC Trust planning.
The Maryland estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's death.
An automatic six-month extension of time to file the Maryland estate tax return may be requested on Form MET-1E (or up to one year if the person required to file the return is located outside of the U.S.); however, this will not extend the time to pay the tax, and interest will accrue during the extension period. In addition, a penalty of up to 10% will be assessed if the tax bill is not paid by the return due date.
For Maryland residents, the Maryland Estate Tax Return, Form MET-1, should be filed with the Register of Wills of the county where the decedent's probate estate is being administered or, if probate is not required, then in the county where the decedent resided at the time of death.
For nonresidents, file the Maryland Estate Tax Return, Form MET-1, with the Register of Wills of the county where the nonresident owned real estate or tangible personal property.
For links to all 24 Maryland Register of Wills websites, refer to the Office of the Register of Wills website.
Mail the estate tax payment directly to the Comptroller of Maryland on or before the due date of the estate tax return at the following address:
Comptroller of Maryland
Estate Tax Section
P.O. Box 828
Annapolis, MD 21404-0828
According to the Maryland Comptroller's website, there is no Maryland estate tax rate table. Instead, the tax is calculated using the maximum allowable credit for state death taxes under §2011 of the Internal Revenue Code, as computed for Maryland purposes, less any Maryland inheritance tax paid to the Register of Wills. For decedents dying after December 31, 2005, the tax cannot exceed 16% of the amount by which the decedent’s taxable estate exceeds $1,500,000. If the inheritance tax is equal to or exceeds the federal credit for state death taxes, no estate tax is due.
For an explanation and tips on how to calculate the Maryland estate tax, refer to following information listed on the Comptroller of Maryland's website: Maryland Estate Tax Calculation Method.
On May 22, 2012, the Family Farm Preservation Act was signed into law. This law reduced the Maryland estate tax rate assessed against Maryland farms valued over $5 million from 16% to 5% when the property passes to someone who agrees to continue to use it for agricultural purposes. If the property is then taken out of agricultural use within 10 years of the owner's death, the estate tax will be recaptured. The law went into effect on July 1, 2012 and applies to deaths occurring after December 31, 2011.
In May 2014, H.B. 739, Maryland Estate Tax - Unified Credit, was signed into law. This law made significant changes to the Maryland's estate tax laws beginning in 2015. Refer to Overview of Changes to Maryland Estate Tax Laws Beginning in 2015 for detailed information about these changes.
For more information about Maryland estate taxes, refer to the Comptroller of Maryland's website: Maryland Estate and Inheritance Tax.
Call the Maryland Comptroller's Office with your Maryland estate tax questions at 410-260-7850 from Central Maryland or 1-800 MD TAXES from elsewhere, Monday - Friday, 8:00 a.m. - 5:00 p.m. EDT.
You can also e-mail your questions as well as fiduciary tax questions to taxhelp@comp.state.md.us.
The estates of Maryland residents, as well as the estates of nonresidents who own real estate, tangible personal property, and/or one or more business entities located in Maryland, are subject to a state estate tax under the following guidelines for deaths occurring in 2015. Refer to Overview of Maryland Estate Taxes in 2014 and Prior Years for deaths occurring before 2015.
NOTE: State laws change frequently and the following information may not reflect recent changes. For current tax or legal advice, please consult with an accountant or an attorney since the information contained in this article is not tax or legal advice and is not a substitute for tax or legal advice.
•When is an estate subject to the Maryland estate tax?
For Maryland residents, an estate may be subject to the Maryland estate tax if the federal gross estate, plus adjusted taxable gifts, plus property for which a Maryland qualified terminal interest property (QTIP) election was previously made on a Maryland estate tax return filed for the estate of the decedent's predeceased spouse, equals or exceeds $1,500,000.
For nonresidents of Maryland, an estate may be subject to the Maryland estate tax if it includes real estate or tangible personal property having a taxable situs within the state of Maryland and the value of the federal gross estate equals or exceeds $1,500,000 under the criteria set forth above.
•What Maryland estate tax forms must be filed?
The estate representative must first complete a federal estate tax return, IRS Form 706, for the year of the decedent's death, even if the estate is not required to file the federal return. Once the federal return is completed, the estate representative can prepare the Maryland Estate Tax Return, Form MET-1.
•Are transfers to a surviving spouse taxable?
Outright transfers to a surviving spouse are not taxable.
For married couples who have used AB Trust planning to reduce their federal estate tax bill, a Maryland estate tax may be due on the B Trust as a result of a gap between the Maryland exemption and the federal exemption. In 2015, that gap is estimated to be $3,920,000. Nonetheless, a married decedent's estate can make a Maryland-only election to treat a trust of which the surviving spouse is the sole beneficiary as "qualified terminable interest property" ("QTIP Trust" for short) for purposes of calculating the Maryland estate tax. Thus, since there will be a gap between the Maryland exemption and the federal exemption and a state-only QTIP election is allowed, married Maryland residents can defer payment of both Maryland and federal estate taxes until after the surviving spouse's death using ABC Trust planning.
•When are the Maryland estate tax return and tax payment due?
The Maryland estate tax return must be filed, and any estate tax due must be paid, within nine months after the decedent's death.
An automatic six-month extension of time to file the Maryland estate tax return may be requested on Form MET-1E (or up to one year if the person required to file the return is located outside of the U.S.); however, this will not extend the time to pay the tax, and interest will accrue during the extension period. In addition, a penalty of up to 10% will be assessed if the tax bill is not paid by the return due date.
•Where are the Maryland estate tax return filed and tax payment made?
For Maryland residents, the Maryland Estate Tax Return, Form MET-1, should be filed with the Register of Wills of the county where the decedent's probate estate is being administered or, if probate is not required, then in the county where the decedent resided at the time of death.
For nonresidents, file the Maryland Estate Tax Return, Form MET-1, with the Register of Wills of the county where the nonresident owned real estate or tangible personal property.
For links to all 24 Maryland Register of Wills websites, refer to the Office of the Register of Wills website.
Mail the estate tax payment directly to the Comptroller of Maryland on or before the due date of the estate tax return at the following address:
Comptroller of Maryland
Estate Tax Section
P.O. Box 828
Annapolis, MD 21404-0828
•What is the Maryland estate tax rate?
According to the Maryland Comptroller's website, there is no Maryland estate tax rate table. Instead, the tax is calculated using the maximum allowable credit for state death taxes under §2011 of the Internal Revenue Code, as computed for Maryland purposes, less any Maryland inheritance tax paid to the Register of Wills. For decedents dying after December 31, 2005, the tax cannot exceed 16% of the amount by which the decedent’s taxable estate exceeds $1,500,000. If the inheritance tax is equal to or exceeds the federal credit for state death taxes, no estate tax is due.
For an explanation and tips on how to calculate the Maryland estate tax, refer to following information listed on the Comptroller of Maryland's website: Maryland Estate Tax Calculation Method.
•What are the special rules for family farms?
On May 22, 2012, the Family Farm Preservation Act was signed into law. This law reduced the Maryland estate tax rate assessed against Maryland farms valued over $5 million from 16% to 5% when the property passes to someone who agrees to continue to use it for agricultural purposes. If the property is then taken out of agricultural use within 10 years of the owner's death, the estate tax will be recaptured. The law went into effect on July 1, 2012 and applies to deaths occurring after December 31, 2011.
•How Will Maryland Estate Taxes Change Beyond 2015?
In May 2014, H.B. 739, Maryland Estate Tax - Unified Credit, was signed into law. This law made significant changes to the Maryland's estate tax laws beginning in 2015. Refer to Overview of Changes to Maryland Estate Tax Laws Beginning in 2015 for detailed information about these changes.
•Where can I find additional information about Maryland estate taxes?
For more information about Maryland estate taxes, refer to the Comptroller of Maryland's website: Maryland Estate and Inheritance Tax.
Call the Maryland Comptroller's Office with your Maryland estate tax questions at 410-260-7850 from Central Maryland or 1-800 MD TAXES from elsewhere, Monday - Friday, 8:00 a.m. - 5:00 p.m. EDT.
You can also e-mail your questions as well as fiduciary tax questions to taxhelp@comp.state.md.us.
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