Maryland Bonus Tax Calculator 2025
Your 2025 Bonus Tax Breakdown
How to Use This Calculator
What Qualifies as Bonus Income in Maryland
Bonus income in Maryland includes any supplemental wages paid in addition to regular salary. This encompasses:
- Performance-based bonuses and incentives
- Holiday or year-end bonus payments
- Sales commissions and spiffs
- Severance packages
- Accumulated vacation or sick pay payouts
- Stock options when exercised
Maryland Bonus Tax Rates for 2025
Maryland applies a combination of federal and state taxes to bonus payments. The federal portion uses a flat 22% withholding rate for supplemental wages under $1 million, while Maryland applies its state income tax rates progressively. For 2025, Maryland maintains county-level tax rates in addition to state rates, creating a three-tiered taxation system for bonuses.
Federal Supplemental Rate Components
The federal tax component for Maryland bonuses follows these guidelines:
- 22% flat rate for supplemental wages under $1 million
- 37% flat rate for supplemental wages exceeding $1 million
- Medicare tax of 1.45% on all bonus amounts
- Additional 0.9% Medicare surtax on amounts exceeding $200,000 annually
Maryland State Bonus Tax Breakdown
Maryland’s state income tax on bonuses uses these progressive rates for 2025:
| Income Bracket | Tax Rate |
|---|---|
| $0 – $1,000 | 2% |
| $1,001 – $2,000 | 3% |
| $2,001 – $3,000 | 4% |
| $3,001 – $150,000 | 4.75% |
| $150,001 – $250,000 | 5% |
| $250,001+ | 5.75% |
For more details, you can refer to the Maryland state income tax rates, where official tax tables are published.
Maryland County Tax Rates Impact on Bonuses
Maryland’s unique county-level taxation significantly impacts total bonus tax obligations.
Each county sets its own local income tax rate, ranging from 2.25% to 3.2%, creating substantial variations in take-home bonus pay depending on residence location.
Baltimore City residents face the highest combined rates with the 3.2% local tax added to state and federal obligations.
To check your specific county’s tax rate, visit the Maryland local income tax rates page, where official rates are listed.
County Rate Comparison for 2025
| County | Local Tax Rate |
|---|---|
| Worcester County | 2.25% |
| Talbot County | 2.40% |
| Kent County | 2.85% |
| Baltimore City | 3.20% |
| Montgomery County | 3.20% |
| Prince George’s County | 3.20% |
What Are the 2025 Bonus Tax Rates in Maryland?
Bonuses are supplemental income. Federal and Maryland taxes apply differently. The federal rate is flat, while Maryland uses progressive rates. Local taxes may also apply based on your county. Here’s what to expect in 2025:
- Federal Tax: 22% on bonuses up to $1 million; 37% above $1 million.
- Maryland State Tax: Ranges from 2% to 5.75% based on income brackets.
- Local Tax: Varies by county, typically 2.25% to 3.2%.
Percentage Method vs. Aggregate Method for Bonus Taxes
Employers use two methods to tax bonuses. The percentage method applies a flat rate. The aggregate method combines bonus and regular pay. Each affects your withholding differently. Understand these to predict your take-home pay.
- Percentage Method: 22% federal tax on separate bonus checks.
- Aggregate Method: Taxes bonus with regular pay at your income tax rate.
- Maryland Rule: Follows federal method choice, adds state and local rates.
Why Are Bonuses Taxed Higher Than Regular Pay?
Bonuses face higher withholding rates. The IRS sees them as supplemental income. This triggers a flat federal rate of 22%. Maryland adds its own tax based on income. Social Security and Medicare taxes also apply:
- Reason: Supplemental income gets special tax treatment.
- Federal Impact: Flat 22% or 37% vs. graduated regular pay rates.
- Total Tax: Includes FICA (7.65%) plus state and local taxes.
Bonus Take-Home Pay Example in Maryland (2025)
Many Maryland employees wonder, “How much will I take home after taxes on a $5,000 bonus?” Below is an estimated breakdown using the percentage method in Montgomery County (3.2% local tax):
| Tax Type | Rate | Amount Withheld |
|---|---|---|
| Federal Tax | 22% | $1,100 |
| Medicare Tax | 1.45% | $72.50 |
| State Tax | 4.75% | $237.50 |
| Local Tax | 3.2% | $160 |
| Total Withheld | – | $1,570 |
| Estimated Take-Home Bonus | $3,430 |
💡 Note: If using the aggregate method, the withholding may be higher based on your total taxable income.
Local Taxes in Maryland: How They Affect Your Bonus
Maryland’s 23 counties and Baltimore City charge local taxes. Rates vary from 2.25% to 3.2%. Your bonus increases your Maryland taxable income. This triggers local tax withholding. Check your county rate for accuracy.
- Examples: Anne Arundel (2.94%), Baltimore City (3.2%).
- Calculation: Applied to total taxable income, including bonus.
- Impact: Adds 2-3% to your overall tax burden.
Tax-Efficient Bonus Strategies for Maryland Residents
Maryland residents can implement several strategies to optimize their bonus taxation. Strategic timing of bonus payments can significantly reduce tax burdens by avoiding threshold crossings. Additionally, maximizing pre-tax deductions like retirement contributions or HSA deposits can lower the taxable portion of your bonus payment.
Recommended Tax Reduction Methods
- Increase 401(k) or 403(b) contributions during bonus payment periods
- Contribute to Health Savings Accounts (HSAs) if eligible
- Consider deferred compensation arrangements if available
- Time bonus receipt strategically between tax years when possible
- Explore charitable giving options to offset tax impact
Recent Changes to Maryland Bonus Taxation for 2025
The 2025 tax year introduces several updates to Maryland’s bonus tax structure. The state legislature maintained the progressive tax brackets while adjusting for inflation. Additionally, certain counties modified their local income tax rates, affecting the overall tax burden on bonus payments for their residents.
Key 2025 Updates
- Inflation adjustments to state tax brackets
- Updated county tax rates in several jurisdictions
- Modified withholding tables for supplemental wages
- Enhanced tax credit availability for certain income levels
- Adjusted standard deduction and exemption amounts
For official updates, visit the Maryland tax bracket updates for 2025.
Maryland State Income Tax Brackets for 2025
Maryland uses a progressive tax system. Your bonus increases your taxable income. Higher income means higher tax rates. Rates range from 2% to 5.75% in 2025. Local taxes add another layer.
| Income Range (Single) | Income Range (Married Joint) | Tax Rate |
|---|---|---|
| $0 – $1,000 | $0 – $1,000 | 2% |
| $1,001 – $2,000 | $1,001 – $3,000 | 3% |
| $2,001 – $3,000 | $3,001 – $100,000 | 4% |
| $250,000+ | $300,000+ | 5.75% |
Note: These are projected 2025 brackets based on 2024 data, pending official updates.
Tax Documentation Requirements for Maryland Bonuses
Maryland employers must provide specific documentation for bonus payments. All supplemental income appears on W-2 forms but is not separately categorized, which can create confusion during tax filing. Employers must clearly communicate withholding amounts and provide supplementary documentation upon request to ensure accurate tax reporting.
Essential Bonus Documentation
- Pay statements showing bonus amount and withholdings
- Year-end W-2 forms, including all supplemental wages
- Employer-provided bonus policy documentation
- Records of retirement contributions from bonus payments
- Documentation of any deferred compensation arrangements
How Maryland Employers Should Withhold Taxes on Bonuses
Employers in Maryland must withhold taxes on bonuses based on IRS and state guidelines. Here’s how:
Choose the Withholding Method:
- Percentage Method: Apply 22% federal tax and state + local rates separately.
- Aggregate Method: Combine bonus with regular pay and withhold taxes at the employee’s total income rate.
Apply Additional Withholdings:
- Medicare Tax: 1.45% on all bonus payments.
- Additional Medicare Tax: 0.9% on earnings over $200,000.
- Social Security Tax: 6.2% (if total earnings are below the annual cap).
Use Official IRS and Maryland Guidelines:
- IRS Supplemental Wage Withholding Rules: https://www.irs.gov
- Maryland Withholding Tables: https://www.marylandtaxes.gov
✅ Employers should update payroll systems to reflect county-specific tax rates for accurate withholding.