How Do Maryland's New Income Tax Brackets and 2% Capital Gains Surtax Affect High Earners?
Last reviewed: July 2026
Maryland high earners now face two new tax provisions under House Bill 352: two new top income tax brackets (6.25% on taxable income over $500,000 and 6.5% over $1,000,000 for single filers) and a permanent 2% surtax on net capital gains for taxpayers with federal adjusted gross income above $350,000. Both took effect for the 2025 tax year. If you sold a business, exercised stock options, or realized a large gain in Maryland, the surtax is reported on the new Form 502CG, and it stacks on top of your regular state income tax.
Key Takeaways
- Maryland's 2% capital gains surtax applies to net gains for taxpayers with federal AGI over $350,000, effective for tax year 2025.
- Two new top brackets under H.B. 352 reach 6.25% over $500,000 and 6.5% over $1,000,000 in taxable income.
- The surtax is permanent, not a one-year measure, and is reported on the new Maryland Form 502CG.
- High earners in Harford County now pay state tax plus the local piggyback rate plus, on large gains, the new 2% surtax.
About the Author: Jeff Judge, CFP®, AEP®, ChFC®, CLU® is Managing Partner of Chesapeake Financial Planners in Forest Hill, Maryland. He has been helping families and business owners in Harford County and the Baltimore metro area navigate state and federal tax planning since earning his CFP® certification in 2013, by using Chesapeake Financial Planners’ signature process, the R.U.D.D.E.R. method™. Jeff has watched a single business sale push a Maryland client past the $350,000 AGI line and trigger a surtax bill nobody saw coming, which is exactly the kind of surprise good timing can soften.
What Is Maryland's New 2% Capital Gains Surtax?
The Maryland capital gains surtax is a 2% additional state tax on net capital gains for any taxpayer whose federal adjusted gross income exceeds $350,000. It was created by House Bill 352, signed into law during the 2025 session, and it applies for the 2025 tax year and forward. According to the Comptroller of Maryland, the surtax is calculated separately from the regular income tax and reported on the new Form 502CG.
Here is the part people miss: the $350,000 threshold is based on your federal AGI, not on the size of the gain itself. So a Harford County couple with $300,000 of ordinary income and a $100,000 gain can cross the line because the gain pushes total AGI over $350,000. Once you are over, the 2% applies to your net capital gains. The surtax is permanent. This is not a temporary revenue measure that sunsets after a year.
There are exclusions. The statute carves out certain gains, including specific retirement-related distributions, so not every dollar of gain is automatically subject to the 2%. Read the Comptroller's published guidance on Form 502CG before assuming a gain is or is not covered.
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What Are Maryland's New Income Tax Brackets for High Earners in Maryland?
H.B. 352 added two new top brackets to Maryland's graduated income tax. For single filers, taxable income over $500,000 is taxed at 6.25%, and income over $1,000,000 is taxed at 6.5%. These sit above the prior 5.75% top rate, which previously applied to income over $250,000. The Maryland General Assembly fiscal documents lay out the full bracket structure, and the thresholds differ for joint filers.
For a high earner in Maryland, the real number is never just the state rate. Maryland counties levy a local "piggyback" income tax on top of the state rate. In Harford County, that local rate adds to your effective state-and-local burden, so a top-bracket earner is paying the 6.5% state rate plus the county rate plus, on large gains, the 2% surtax. Jeff Judge often tells clients that the headline rate and the rate you actually pay are two different conversations, and the gap is where planning lives.
The brackets and the surtax interact. A large capital gain can both push your AGI over $350,000 (triggering the surtax) and push your taxable income into the 6.25% or 6.5% bracket in the same year. That stacking is what makes timing matter so much for Maryland sellers.
| Provision | Threshold | Rate |
|---|---|---|
| New bracket (single) | Taxable income over $500,000 | 6.25% |
| New bracket (single) | Taxable income over $1,000,000 | 6.5% |
| Capital gains surtax | Federal AGI over $350,000 | 2% on net capital gains |
How Can I Reduce Taxes When Earning $200K to $500K?
How Does Form 502CG Work for Maryland Taxpayers?
Form 502CG is the new Maryland form used to calculate and report the 2% capital gains surtax. If your federal AGI exceeds $350,000 and you have net capital gains, you complete Form 502CG, compute the 2% surtax on the gains subject to the tax, and carry the result to your Maryland return. The Comptroller of Maryland publishes the form and its instructions, and those instructions are the authority on which gains are included or excluded.
A practical point for anyone with a tax preparer: confirm your software is pulling the surtax through correctly in its first filing season. New forms are exactly where errors hide. I have seen clients across many transitions assume the software handled a new line item automatically, only to find it was skipped. Check the actual Form 502CG line before you sign.
If you make estimated payments, build the surtax into your quarterly numbers. A large gain realized in Q1 can create an underpayment problem if your estimates only account for the regular brackets.
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Why This Matters for High Earners in Harford County and Across Maryland
Chesapeake Financial Planners sits in Forest Hill, in the heart of Harford County, and a large share of the clients we work with are business owners, equity-compensated professionals, and pre-retirees with concentrated gains. For those families, H.B. 352 changes the math on when and how to realize gains. A business owner planning an exit near Bel Air, an executive with vesting RSUs in the Baltimore metro, and a retiree in Maryland selling a long-held property all now share the same question: does this gain cross the $350,000 AGI line, and can the timing be managed?
This is where a deliberate process beats a reactive one. We run clients through the R.U.D.D.E.R. Method™, Chesapeake Financial Planners' six-step planning process: Review and Recognize, Uncover and Understand, Design and Develop, Discuss and Decide, Execute and Empower, and Reassess and Refine. For a Maryland seller, the "Design and Develop" step is where we model whether spreading a gain across two tax years, or pairing it with harvested losses, keeps AGI under the surtax threshold or softens the new bracket impact.
The lever here is rarely the investment. It is the calendar and the AGI line. Two clients with identical gains can owe very different Maryland surtax bills depending only on how the sale was structured and timed.
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Frequently Asked Questions
What is the Maryland capital gains surtax for 2025?
The Maryland capital gains surtax is a permanent 2% additional state tax on net capital gains, created by House Bill 352 and effective for the 2025 tax year. It applies only to taxpayers whose federal adjusted gross income exceeds $350,000, and it is reported on the new Form 502CG with the Maryland return.
Who pays the 2% Maryland capital gains surtax in Harford County?
Any Harford County taxpayer with federal adjusted gross income above $350,000 and net capital gains pays the 2% surtax. The threshold is based on total federal AGI, not the gain alone, so a large one-time gain can push an otherwise moderate-income household over the line and into the surtax for that year.
What are Maryland's new income tax brackets under H.B. 352?
Under House Bill 352, Maryland added two new top brackets for high earners. For single filers, taxable income over $500,000 is taxed at 6.25%, and income over $1,000,000 is taxed at 6.5%. These sit above the prior 5.75% top rate, and joint-filer thresholds differ, so confirm your filing status against the Comptroller's tables.
How do I report the Maryland capital gains surtax?
You report the Maryland capital gains surtax on Form 502CG, the new form the Comptroller of Maryland created for this provision. If your federal AGI exceeds $350,000 and you have net capital gains, you calculate the 2% surtax on the gains subject to the tax and carry that amount to your Maryland income tax return.
Can I avoid the Maryland 2% capital gains surtax in Maryland?
You cannot avoid the surtax on gains that qualify, but you can sometimes manage whether and how much applies. Spreading a sale across two tax years, harvesting capital losses to offset gains, or timing a large transaction to keep federal AGI under $350,000 in a given year can reduce or eliminate exposure depending on your full tax picture.
Is the Maryland capital gains surtax permanent or temporary?
The Maryland 2% capital gains surtax is permanent. House Bill 352 enacted it as an ongoing provision, not a one-year or temporary revenue measure, so high earners in Maryland should plan for it as a standing part of state tax law rather than a single-season event affecting only 2025 returns.
Ready to put a plan around Maryland's new capital gains surtax and tax brackets before your next big gain? Jeff Judge and the Chesapeake Financial Planners team serve families and business owners across Harford County, Bel Air, and the Baltimore metro from our Forest Hill office. Schedule a free fit call at chesapeakefp.com.
Want to go deeper? Our Tax Moves for High Earners walks through this step by step.
Prefer a different starting point? Our Tax Strategy Readiness Quiz is worth a look.
Disclosures
The information provided is for educational purposes only and should not be construed as investment advice. Investment strategies should be tailored to individual circumstances, risk tolerance, and goals. Past performance doesn't guarantee future results. Consult with qualified financial professionals regarding your specific situation.
This information is not intended to be a substitute for specific individualized tax, investment or legal advice. We suggest that you discuss your specific situation with a qualified tax, legal or financial advisor.
Advisors associated with Chesapeake Financial Planners may be either (1) LPL Financial Registered Representatives offering securities through LPL Financial, Member FINRA and SIPC, and investment advisor representatives offering investment advice through Great Valley Advisor Group; or (2) solely investment advisor representatives offering investment advice through Great Valley Advisor Group and not affiliated with LPL Financial. Great Valley Advisor Group, and Chesapeake Financial Planners are separate entities from LPL Financial.
