A new study by Gold IRA Custodians ranks Maryland as the seventh least tax-friendly state for retirees in 2025, scoring 43.76 out of 100 in a comprehensive analysis of state tax policies. The study, which evaluates retirement income taxes, property taxes, sales taxes, and cost of living, highlights Maryland’s high tax burden as a challenge for retirees on fixed incomes, placing it among states like New York and Vermont.
The research, combining seven financial factors, underscores Maryland’s complex tax structure. Retirement income taxes, weighted at 30%, significantly impact the state’s ranking. Maryland exempts Social Security benefits from state income taxes, a major advantage, but fully taxes IRA withdrawals and partially taxes pensions and 401(k) distributions, earning a bronze-tier rating. Retirees aged 65 and older can exclude up to $39,500 of pension income in 2024, but this deduction is reduced by any untaxed Social Security benefits, per the Maryland Comptroller’s Office.
“Choosing the right state for retirement can significantly impact how far your savings stretch,” said Tim Schmidt, founder of Gold IRA Custodians. “Often, retirees do not realize how much their location affects their financial health until they see their first tax bill in retirement.” Maryland’s tax policies, including its unique combination of estate and inheritance taxes, contribute to its low ranking, affecting retirees planning to leave legacies.
Maryland’s property tax rate, averaging 1.02% with a median home value of $380,500, results in annual taxes of about $3,880, close to the national median, according to SmartAsset. The state’s homestead tax credit caps annual assessment increases at 10%, offering some relief, but high home values amplify costs. The 6% state sales tax, with no local additions, is moderate, but the overall tax burden—11.3% of income—ranks Maryland 45th nationally, per the Tax Foundation.
The study also notes Maryland’s estate tax, with a $5 million exemption and rates up to 16%, and its 10% inheritance tax, from which immediate family members are exempt. Maryland is the only state imposing both, making it less attractive for high-net-worth retirees, as reported by Kiplinger.The cost of living index, at 114.2, is 14% above the national average, further straining retirement budgets.
Despite these challenges, Maryland offers some retiree benefits. The Retirement Tax Elimination Act of 2022 provides a nonrefundable credit of up to $1,000 for individuals or $1,750 for couples where both spouses are 65 or older, though this is limited by fiscal conditions. Military retirees can subtract up to $12,500 of retirement income, with an additional $20,000 exclusion for those 55 and older, per the Maryland Department of Veteran Affairs. Healthcare costs, at 84.2 on Sperling’s index, are below the national average, offering some financial relief.
Wyoming, Nevada, and Tennessee topped the study as the most tax-friendly states, with no state income taxes and low property and sales taxes. Wyoming, scoring 90.27, has no tax on retirement income and a 0.58% property tax rate. In contrast, New York, the least tax-friendly state with a 33.98 score, taxes most retirement income and has a 1.60% property tax rate and a 123.3 cost of living index. Maryland’s 43.76 score places it closer to the bottom, reflecting its progressive income tax (2% to 5.75%), local taxes up to 3.2%, and estate tax policies.
“When considering relocation, look beyond the obvious factors like weather and proximity to family,” Schmidt advised. “Dig into how each state treats Social Security, pension income, and retirement account withdrawals. Watch out for hidden tax traps like high sales taxes that slowly erode your purchasing power day after day.” Maryland’s mix of high taxes and living costs makes it less competitive for retirees compared to states like Florida or Texas, which offer no income tax and lower overall burden. The study’s methodology weighted retirement income taxes heavily, followed by cost of living (15%) and other taxes (10% each). Data was sourced from the U.S. Census Bureau, Kiplinger, NAS Investment Solutions, and the Tax Foundation, ensuring a robust analysis. Maryland’s ranking reflects its broader tax competitiveness issues, with the state placing 46th on the 2025 State Tax Competitiveness Index, as noted by the Tax Foundation.
Retirees considering Maryland should weigh its tax drawbacks against its cultural and recreational offerings, such as Chesapeake Bay access and urban amenities. For those prioritizing financial security, states with lower taxes may better preserve retirement savings, according to the study’s findings.
