Maryland LLC Taxes

If you’re interested in forming a limited liability company (LLC) in Maryland, you’ll need to spend some time in order to ensure that you understand the state-specific tax requirements that you’ll need to satisfy. 

This guide offers a breakdown of the required Maryland LLC Taxes at the federal, state, and local levels, including guidelines on how to file your taxes in order to ensure your LLC stays compliant.

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

How Is an LLC Taxed in Maryland?

Taxation in Maryland isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.

While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:

• C Corporations: The LLC is treated as a separate entity to its owners, paying corporate income tax rates on its total profit while the owners also pay personal income taxes on any distributions they take.
• S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay self-employment tax or FICA tax on them.

The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Maryland to help you ensure your LLC navigates them effectively.

Maryland Local Taxes

The local tax regulations in Maryland vary across municipalities, which include several taxes that are unique to each locality. 

The following section is an overview of local taxes that could be relevant to your LLC. 

Local Income Tax

Under Maryland income tax law, residents pay local income taxes based on their county of residence, which ranges from 2.25% to 3.2% of their taxable income. These taxes are reported and paid on Form 502 (line 28) to the Comptroller of Maryland. 

Keep in mind that local income taxes need to be paid in addition to state income tax — which is a flat rate of 8.25%. 

Note: The Comptroller of Maryland provides a list showing local income tax rate variations across different counties and Baltimore City.

Property Taxes

In Maryland, property owners, including LLCs, must pay property taxes to their local government; this is based on each property's value. 

The State Department of Assessments and Taxation (SDAT) regulates property assessment and tax laws, and local governments determine the exact tax amounts and issue property tax bills.

Keep in mind that property taxes are broken down into two categories:

• Real Property Tax: LLCs owning, using, or leasing land or buildings in Maryland may be required to pay real property tax. For filing queries, we recommend reaching out to the local assessment office.
• Business Personal Property Tax: LLCs owning assets like furniture, equipment, machinery, or inventory may be required to pay business personal property tax, with rates varying depending on the local jurisdiction in question. 

Note: Property taxes are filed and paid at local tax offices. Check SDAT’s Business Services Division for current property tax rates.

Admissions & Amusement Tax

In Maryland, the admissions and amusement tax is a local tax administered by the Comptroller's Office for counties, Baltimore City, cities, towns, and the Maryland Stadium Authority. 

This tax is levied on gross receipts from admissions, recreational or sports equipment rentals, and sales of goods or services in entertainment venues like nightclubs. 

Tax rates vary based on location and activity, with some exceptions and special cases. Statewide, a 30% tax applies to net proceeds from electronic bingo, pull-tab tickets, and electronic tip jars.

Exemptions include membership fees for unlimited facility use, ongoing non-league sports classes, and charges for using bowling alleys and lanes.

Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant. 

Maryland State Taxes

Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Maryland. 

Individual Income Tax

In Maryland, residents and workers must pay state income tax, with rates varying based on income and filing status. 

For LLC owners, personal income tax includes their share of the LLC's profits. 

Maryland’s tax rates range from 2% (on the first $1,000) to 5.75% (for incomes over $250,000). This is $300,000 for joint filers, heads of households, and qualifying surviving spouses.

Keep in mind that nonresidents pay an additional 2.25%. 

Corporate Income Taxes

Maryland taxes business income for corporations; this includes LLCs that elect to be taxed as C Corps. 

Corporations pay 8.25% on Maryland income, with adjustments for state-specific modifications. Keep in mind that you may also be able to qualify for certain tax credits depending on your business’s specificities. 

Note: You can find everything you need to file your business tax in the Comptroller’s Filing Information section, which includes how to register as a new filer, what forms to use, how to fill them out, and when to submit them.

Sales and Use Taxes

Maryland charges a 6% sales and use tax on most goods and services, with exemptions for certain items like food for later consumption and prescription drugs. 

Motor vehicles, specifically, are exempt but are subject to titling taxes instead. 

Note: If your LLC will be selling taxable goods or services, you will need to obtain a sales and use tax license.

Employer Withholding Tax

Employers in Maryland must withhold state and local income taxes from employees' wages, which are determined in accordance with each employee’s income and residence. 

Employers file a withholding certificate (Form MW507) monthly or quarterly and maintain a withholding account for tax payments. Annual returns are due by April 15.

Note: You can see the Employer Withholding Guide and use the tax tables (regular and percentage) to make it easier for you to prepare your payroll withholding tax. 

Digital Advertising Gross Revenues Tax

Maryland's digital advertising tax applies to businesses with over $100 million global gross revenues and at least $1 million from digital advertising in Maryland. Tax rates range from 2.5% to 10%, reported and paid quarterly via Form 600D.

State Excise Taxes

Maryland imposes excise taxes on products like alcohol, tobacco, and motor fuel. Alcohol tax rates are $4.62 per gallon for spirits, $1.35 for wine, and $49 for beer, levied on the wholesale price. Cigarettes are taxed at $2 per pack, and motor fuels at $0.239 per gallon, both applied to wholesale prices. These rates vary by product and activity.

Federal Taxes

Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:

Income Tax

By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as separate entities from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income tax on them at the personal rate of your tax bracket.

Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.

Self-Employment Tax

In addition to income tax, members of single- and multi-member LLCs will need to pay federal self-employment taxes on the share of the business’s profits that they report on their personal tax return at the end of the year.

This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.

Employer Taxes

If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.

Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.

Excise Tax

If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.

Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.

How to File LLC Taxes in Maryland

Below, we’ve outlined the general process an LLC in Maryland will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in. 

Step 1: Gather Your Documentation

To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:

• You and your partner’s Social Security number, date of birth, and residential address
• The previous year’s tax returns
• Your LLC’s Federal Tax Identification Number or Employer Identification Number (EIN)

Then, you’ll need to gather all documentation related to your business’s income, such as:

• Invoices you’ve issued
• Sales transaction logs
• Electronic payment reports from services like PayPal or Stripe

Lastly, assemble all records pertaining to your business expenses, which should cover:

• Lease receipts for your business premises
• Bills for utilities
• Records of office supplies purchases
• Documentation of business-related travel
• Payroll records for employees

Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return. 

Step 2: Find The Right Tax Forms

Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:

• Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
• Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
• C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
• S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.

Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.

With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.

Step 3: File Your Taxes

The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:

• Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
• State Tax Returns: You can file your Maryland tax return for free online using the iFile (for individual income tax returns) or bFile (for sales, withholding, and other industry-specific taxes) services provided by the Comptroller of Maryland.
• Local Tax Returns: You can also use bFile for managing, filing, and paying your local tax returns. However, you can contact SDAT or visit one of their local assessment offices for property taxes. 

Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form. 

For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings. 

Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes. 

Keep Your Maryland LLC Compliant

While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant. 

Maryland LLC Annual Report

Maryland LLCs must file an annual report by April 15 each year to maintain their good standing with the Secretary of State. The report is meant to ensure that your LLC’s information remains up to date, and so includes things like its name, address, registered agent, principal office, and tax ID. 

The filing fee is $300, which is payable online via Maryland Business Express or by mail with Form 1. 

 Note: A 60-day extension is available, but late filings incur fees ranging from $30 to $500.

Licensure and Tax Requirements

Maryland LLCs often need various licenses and permits:

• Sales and Use Tax License: LLCs selling goods or taxable services must obtain this license from the Maryland Comptroller’s Office.
• Professional Licenses: Services requiring state licensing (e.g., accounting, law, medicine) need the appropriate professional license.
• Environmental Permits: Activities impacting the environment may require permits from the Maryland Department of the Environment.

Maryland's OneStop Portal assists in identifying necessary licenses and permits. Local factors may also influence licensing needs, and further information is available from the area's Clerk of the Court.

Maryland LLC Taxes FAQs