Maryland does not tax Social Security benefits. Whatever portion of your benefits is taxable on your federal return can be subtracted in full on your Maryland return, with no age limit, no income cap, and no disability requirement.1Comptroller of Maryland. Tax Guidance – Seniors and Retirees The exemption covers state tax and the local county “piggyback” tax, so the benefits leave your Maryland taxable income entirely. If Social Security is your only income, you owe Maryland nothing. If you also draw a pension, the picture is more complicated, because Social Security quietly reduces a different tax break you might otherwise claim.
How to Claim the Subtraction
Maryland’s income tax calculation starts from your federal adjusted gross income, which already includes whatever portion of your Social Security the IRS treated as taxable. Left alone, that amount would flow into Maryland’s brackets. The subtraction pulls it back out.
The authority sits in state law, which permits a subtraction for all payments received under Title II of the Social Security Act and the Railroad Retirement Act.2Maryland General Assembly. Maryland Tax General Code 10-207 (2025) Mechanically, you take the taxable Social Security figure from your federal return and enter it as a subtraction on Form 502. On the 2025 Form 502 (filed in 2026), that goes on Line 11, “Federally Taxed Social Security and Railroad Retirement Benefits.”3Comptroller of Maryland. 2025 Resident Instruction Booklet The line number can move from year to year, so check the current instructions, but the subtraction itself has been on the books for decades.
Because local county taxes are calculated on Maryland taxable income rather than on the state tax bill, once your Social Security is subtracted at the state level it is automatically out of the local tax base too.
The Catch: Social Security Reduces Your Pension Exclusion
Maryland offers a separate subtraction for pension and retirement annuity income. This one has eligibility rules: you must be at least 65 by the end of the tax year, or you (or your spouse) must be totally disabled.4Comptroller of Maryland. Technical Bulletin 51 – Senior Citizens and MD Income Tax It applies to income from employer-sponsored plans such as 401(k), 401(a), 403(b), and 457(b) plans. It does not cover distributions from traditional IRAs, Roth IRAs, SEP plans, or Keogh plans.5Comptroller of Maryland. Maryland Pension Exclusion
For tax year 2025, the maximum exclusion is $41,200.6Maryland General Assembly. Fiscal and Policy Note for House Bill 13 Here is the part most retirees miss. That maximum is reduced dollar-for-dollar by the total Social Security and Railroad Retirement benefits you receive, counting both the taxable and non-taxable portions.4Comptroller of Maryland. Technical Bulletin 51 – Senior Citizens and MD Income Tax
So if you collect $28,000 in Social Security and the cap is $41,200, your available pension exclusion drops to $13,200. A retiree receiving $41,200 or more in Social Security has no pension exclusion left. The benefits themselves still aren’t taxed, but the offset pushes more of your pension income into Maryland’s taxable column. To claim what remains of the exclusion, complete the Pension Exclusion Computation Worksheet in the Form 502 instructions and attach Form 502R.3Comptroller of Maryland. 2025 Resident Instruction Booklet
Other Breaks That Stack on Top
Starting with the 2025 tax year, Maryland offers a nonrefundable senior tax credit that reduces your tax bill directly.7New York Codes, Rules and Regulations. Maryland Tax General 10-754 – Tax Credit for Seniors Single filers aged 65 or older get $1,000 if their federal AGI does not exceed $100,000. Joint filers, surviving spouses, and heads of household get $1,750 if federal AGI does not exceed $150,000, or $1,000 if only one spouse is 65 or older.
Maryland also gives an additional $1,000 personal exemption to taxpayers 65 or older, on top of the regular personal exemption.6Maryland General Assembly. Fiscal and Policy Note for House Bill 13 All of these benefits combine on the same return. A 65-year-old retiree earning under $100,000 can claim the Social Security subtraction, whatever pension exclusion survives the offset, the senior credit, and the extra exemption.
What Actually Gets Taxed
If Social Security is your only income, you owe nothing to Maryland or your county. The subtraction removes every dollar the federal return counted, and there is no remaining base for the state or local rate to touch.
Once you add pension income, IRA withdrawals, or investment earnings, the arithmetic changes. A retiree with $30,000 in Social Security and $40,000 in 401(k) distributions could exclude only about $11,200 of that pension income under a $41,200 cap, leaving roughly $28,800 exposed to Maryland state and local tax. IRA distributions do not qualify for the pension exclusion at all, so those come through fully taxable after the standard deduction and personal exemptions.
Whatever remains flows into Maryland’s graduated brackets. For 2026, state rates run from 2.00% on the first $1,000 of taxable income up to 6.50% at the top, with a 4.75% bracket that reaches $100,000 for single filers and $150,000 for joint filers.8Comptroller of Maryland. 2026 Maryland State and Local Income Tax Withholding Information Local county rates for 2026 range from 2.25% in Worcester County to 3.30% in Dorchester and Kent counties, with most jurisdictions at 3.20%.9Maryland Department of Legislative Services. 2026 County Local Tax Rates Most retirees living on Social Security and a modest pension will sit in the 4.75% state bracket or lower after applying the subtractions.
The senior credit trims what is left, but it is capped and it phases out entirely once your federal AGI crosses $100,000 for single filers or $150,000 for joint filers. Timing withdrawals to stay below those thresholds can be worth hundreds of dollars in direct tax savings.