How Maryland Taxes Retirees

Maryland is another of these states where you need to look beyond the top line tax rates and actually dive into what your locality can add to your burden.  For instance, Maryland income tax is 5.75%.  Which may or may not be reasonable depending on your perspective.  Yet when you through local taxes into the mix, the overall burden is over 10%!   Sales tax though is an 'all-in" 6% with localities adding NOTHING to that tax.  So, what looks to be an expensive state sales tax is actually rather cheap when you factor what localities can add.  Property taxes are high from an overall dollars paid due to Maryland being a high cost of living state.  But from a pure percentage perspective Maryland is towards the middle in overall property tax rate.  So, all in all, Maryland is not nearly as burdensome as some might believe.  Social Security benefits are not taxed. And there is a SIGNIFICANT tax exclusion from pensions and qualified plan distributions.  $29k per taxpayer is excluded from taxation on those plans.  A HUUUUUGGGGGEEEE caveat though.  IRAs do not get that exclusion!    Crazy as that may seem, it's the tax code in MD.  I simply can not see the reason ANYONE who resides in Maryland should roll their 401k/TSP/403B plan to an IRA given the tax structure in MD.   You're talking nearly $60k extra tax free income by leaving your money in your employer sponsored plan. That's REAL money, my friends.