Maryland Payroll Compliance Guide 2026: Complete Employer Reference

Maryland Payroll Overview

Maryland imposes more distinct payroll obligations than most mid-Atlantic states. You have state income tax withholding that uses a graduated rate schedule, plus a county or city piggyback tax that varies by the employee’s county of residence. That means your withholding calculation changes for each employee based on where they live—not just where they work. Maryland publishes combined withholding tables that incorporate both state and local rates, which simplifies the math, but you still need to know each employee’s county.

On top of that, Maryland’s paid family and medical leave program under the Time to Care Act (FAMLI) starts collecting a 0.9% combined contribution, with quarterly reporting, on January 1, 2027. It collects nothing in 2026. The minimum wage reached $15.00/hr statewide in 2024, and the Healthy Working Families Act requires paid sick leave for most employers.

Maryland SUI rates for 2026 top out at 7.50%, and the $8,500 wage base limits how much that ceiling actually costs per employee.

Maryland Payroll Taxes: 2026 Rates and Wage Bases

Maryland State and Local Income Tax Withholding

Maryland’s income tax has ten brackets at the state level for 2026, ranging from 2% on the first $1,000 of taxable income up to 6.5% above $1,000,000 (single filers). Most working adults fall primarily in the 4.75% or 5% brackets. On top of state tax, Maryland imposes a local piggyback tax based on the county where the employee lives, not where they work.

Local County Tax Rates

The Comptroller of Maryland publishes combined withholding tables that bake in both the state brackets and each county’s local rate. Download the current Maryland Employer Withholding Guide and the county-specific tables at taxes.marylandtaxes.gov. You select the table matching each employee’s county of residence and filing status.

Employees Who Live Outside Maryland

If an employee lives in another state but works in Maryland, Maryland income tax withholding still applies to wages earned in Maryland. However, you do not withhold the local county tax for out-of-state residents—instead you withhold at a special non-resident rate of 2.25%. These employees may owe income tax to their home state as well; that is their responsibility to manage, not yours.

Maryland MW507 Form

Each Maryland employee completes a Maryland MW507 withholding exemption certificate. The MW507 captures county of residence, filing status, and exemptions. Without a completed MW507, withhold as if the employee had claimed one withholding exemption. Employees update their MW507 when their county or filing status changes.

Maryland Time to Care Act: FAMLI Starts in 2027

Maryland’s Time to Care Act created a state paid family and medical leave insurance program (FAMLI). Contributions begin January 1, 2027, and benefits begin in January 2028; nothing is collected in 2026. Contributions fund a state insurance program that pays benefits directly to eligible employees who take qualifying leave.

Contribution Rate and Split

The total contribution rate for 2027 is 0.9% of wages up to the Social Security wage base. Employers may withhold up to half (0.45%) from employees’ pay. Employers with fewer than 15 employees remit only 50% of the rate and may withhold that amount from employees’ pay. Each November, starting in 2027, the Maryland Department of Labor announces the rate for the following year.

Benefit Coverage

Once benefits begin in January 2028, FAMLI will let eligible employees take up to 12 weeks of paid leave to care for themselves or a family member, paid up to $1,000 a week. Benefits replace a portion of the employee’s wages up to a weekly cap tied to the state average weekly wage.

Employer Obligations

Employers will register online at paidleave.maryland.gov starting in fall 2026 and, from January 1, 2027, remit contributions quarterly; the first payment is due April 30, 2027. Maryland also requires employers to provide employees with a written notice of their PFML rights and post the PFML notice at each work location.

Private Plan Option

Maryland allows employers to substitute an approved private paid leave plan for the state program. The private plan must meet or exceed the state program’s benefit levels. Employers with an approved plan are exempt from state PFML contributions while the private plan remains in effect. Apply through the Maryland Department of Labor.

Maryland SUI: Unemployment Insurance

Maryland SUI is administered by the Maryland Department of Labor. The taxable wage base in 2026 is $8,500 per employee per year.

New Employer Rate and Experience Rating

New Maryland employers pay SUI at 1.0% to 2.6% on the first $8,500 per employee, so new-employer SUI is at most $221.00 per employee per year. The 2026 experienced-employer range spans 0.30% to 7.50%. At the 7.50% maximum, the per-employee cap is $637.50 per year. Heavy layoff history can push rates toward that ceiling.

Maryland calculates experience rates using a benefit ratio: the benefit charges to your account divided by your taxable wages for the three fiscal years before the July 1 computation date. Maryland sends Experience Rate Notices each January.

Quarterly SUI Filing

File Maryland SUI returns quarterly through the Maryland Unemployment Insurance (MUI) portal at uiportal.labor.maryland.gov. Report total wages, taxable wages, and individual employee wage detail. Quarterly deadlines follow the standard schedule: April 30, July 31, October 31, and January 31.

Maryland Healthy Working Families Act: Paid Sick Leave

Maryland requires employers to provide paid sick and safe leave under the Healthy Working Families Act:

• Employers with 15 or more employees: Provide paid sick and safe leave
• Employers with fewer than 15 employees: Provide unpaid sick and safe leave

Accrual rate: 1 hour per 30 hours worked, up to 40 hours per year. Employees can carry over up to 40 hours of unused leave into the next year. Leave may be used for the employee’s own illness, care for a family member, or for matters related to domestic violence, sexual assault, or stalking.

Maryland is one of a smaller group of states that requires all employers—not just those above a size threshold—to provide some form of sick leave. Track accruals carefully. The Maryland Department of Labor enforces the Act.

Wage Payment Laws and Final Paychecks

Maryland wage payment law appears in the Maryland Labor and Employment Article (§3-501 et seq.), enforced by the Maryland Department of Labor, Division of Labor and Industry.

Pay Frequency

Maryland employers must pay wages at least twice per month on regular paydays established in advance. The paydays must be no more than 15 days apart. Exempt employees may be paid monthly.

Final Paycheck Deadline

Maryland requires final wages by the next regular payday after separation, for both discharges and voluntary resignations. There is no accelerated same-day deadline for terminations in Maryland.

Overtime and FLSA

Maryland has its own overtime law that mirrors FLSA for most employers: 1.5× the regular rate for hours over 40 in a workweek. Maryland also applies special overtime rules to agricultural employees and exempt classifications. The state white-collar exemption threshold tracks the federal FLSA at $684 per week.

Maryland’s overtime law extends to some employees not covered by FLSA, particularly at smaller employers. If your business is too small to fall under federal FLSA coverage (generally less than $500,000 in annual revenue and not engaged in interstate commerce), Maryland state law still requires overtime pay for qualifying hours.

Maryland Minimum Wage 2026

Maryland’s statewide minimum wage reached $15.00 per hour in 2024 after a phased schedule. The rate remains at $15.00 for 2026 barring legislative changes.

Some Maryland counties have passed higher local minimums. Montgomery County implemented its own higher minimum wage phase-in. Howard County and Prince George’s County have also enacted local rates. If your employees work in these counties, the higher local rate governs. Verify current local minimum wages for any county where you employ workers.

Tipped Employees

Maryland’s tipped employee minimum wage is $3.63 per hour in direct wages for employees who regularly receive tips, provided tips bring total hourly compensation to at least $15.00. The employer must make up any shortfall.

New Employer Registration

Maryland new employers register with the Comptroller of Maryland for income tax withholding, the Maryland Department of Labor for SUI and PFML, and the IRS for federal obligations.

Federal EIN

Apply at irs.gov/ein first. Free, same-day issuance online.

Maryland Withholding Registration (Comptroller)

• Where: Maryland Business Registration at bfile.taxes.marylandtaxes.gov
• What you get: Maryland Central Registration Number, withholding account, assigned filing frequency
• Information needed: EIN, business name, address, entity type, first Maryland payroll date

Maryland SUI Registration

• Where: Maryland Unemployment Insurance portal at uiportal.labor.maryland.gov
• Trigger: $1,500 in wages in a quarter, or one or more employees for 20 weeks in a year
• What you get: Maryland UI Employer Account Number, new-employer rate of 1.0%–2.6%

Maryland PFML Registration

• Where: Maryland Dept. of Labor at paidleave.maryland.gov (registration opens fall 2026)
• Required for: All Maryland employers

New-Hire Reporting

Report new hires within 20 days to the Maryland State Directory of New Hires at mdnewhire.com. Required fields: employee name, address, SSN, start date, employer FEIN and address.

Maryland Payroll Compliance Calendar 2026

Frequently Asked Questions

How does Maryland income tax withholding work with county taxes?

Maryland withholding combines state and local rates. Each employee’s state tax depends on their income level (rates from 2% to 6.5%), and their county tax adds on top based on their county of residence (2.25% to 3.3%). The Comptroller publishes combined tables that already incorporate both rates—select the table matching each employee’s county and filing status. File all withholding with the Comptroller; the Comptroller distributes the county portion.

When does Maryland’s paid family and medical leave program start?

Maryland’s Time to Care Act paid leave program (FAMLI) collects no contributions in 2026. Contributions begin January 1, 2027, at a combined rate of 0.9% of wages up to the Social Security wage base, and employers may withhold up to half (0.45%) from employees. Benefits begin in January 2028 and cover up to 12 weeks of paid leave. All Maryland employers must register when registration opens in fall 2026.

What is the Maryland SUI rate for new employers in 2026?

New employers pay 1.0% to 2.6% on the first $8,500 per employee, so the most a new employer pays is $221.00 per employee per year. Experienced employers range from 0.30% to 7.50% in 2026, and the low wage base limits absolute cost.

What is the minimum wage in Maryland for 2026?

Maryland statewide minimum wage is $15.00 per hour, reached in 2024. Several counties—Montgomery, Howard, and Prince George’s—have enacted higher local minimums. If your employees work in those counties, verify the current local rate, which may be above $15.00.

When must Maryland employers pay a terminated employee?

Final wages are due by the next regular payday after separation. Maryland doesn’t impose an accelerated deadline for involuntary terminations. Both discharges and resignations follow the same rule.

Which county has the highest local income tax rate in Maryland?

Dorchester County and Kent County charge the highest local rate for 2026, 3.30%. An employee living in one of these counties at the 6.5% state bracket faces a combined Maryland income tax rate of 9.8% on taxable income above the state’s top bracket threshold.

Does Maryland require employers to provide paid sick leave?

Yes. The Healthy Working Families Act requires employers with 15 or more employees to provide paid sick and safe leave. Accrual is 1 hour per 30 hours worked, up to 40 hours per year. Employers with fewer than 15 employees must provide unpaid sick leave on the same accrual schedule.