Active-duty pay
Taxed
Active-duty pay taxable to MD residents.
State Guide · MD
Maryland — Military Tax Treatment
Maryland taxes active duty and Guard pay and only partially exempts retirement income. The subtraction grows at 55 — retiring at 38 on a 20-year pension means 17 years of the smaller exemption before the larger tier kicks in.
Tax treatment at a glance
Guard & Reserve drill pay
Taxed
Guard and Reserve drill pay is taxable Maryland income. SCRA protections apply during federal activation but not routine drill.
Military retirement pay
Partially Exempt
Subtraction: first $20,000 of military retirement excluded for those 55+; first $12,500 for under-55.
The numbers · verified for tax year 2025
Top marginal rate
6.50%
Retirement-pay exemption
Up to $20,000 · age 55+
For tax year 2025, Maryland residents may subtract up to $12,500 of military retirement income if under age 55, or up to $20,000 if age 55 or older on the last day of the tax year (Form 502, line 13).
Standard deduction
A new 6.25% bracket (>$500k single / $600k MFJ) and 6.5% bracket (>$1M / $1.2M) took effect for 2025, raising the top rate from 5.75%. Counties also levy a local income tax of roughly 2.25%–3.20% on top of the state rate. Standard deduction: $3,350 single / $6,700 married filing jointly.
VA disability compensation
Always tax-free
Federally tax-free under 38 USC § 5301. No state taxes VA disability compensation as income — Maryland included.
Survivor Benefit Plan (SBP)
Follows retirement
Maryland's military retirement subtraction likely applies to SBP as well — verify with Maryland DoR.
Federal rules that override state law
SCRA — Servicemembers Civil Relief Act
Active-duty servicemembers pay state income tax only to their state of legal domicile — not the state where they are stationed. If you are from Texas and stationed in Maryland, Maryland cannot tax your military pay. This applies during all active duty periods and during Guard/Reserve mobilizations on federal (Title 10) orders.
MSRRA — Military Spouses Residency Relief Act
Military spouses can maintain their home-state domicile even when living in a different state due to their servicemember's orders. A spouse who is a Texas resident following their servicemember to Maryland can keep Texas as their tax domicile and avoid Maryland state income tax on their wages.
Guard & Reserve — the SCRA gap
SCRA pay protections apply during federal (Title 10) activation orders. During routine drill weekends and state-only activations, Guard and Reserve members are state residents serving in their home state — SCRA does not protect their drill pay from state income tax. Whether Maryland exempts that pay is the state-specific question answered above.
Filing watch-outs
- 01Retirement subtraction: Form 502SU, code "y" (military retirement income)
- 02Age determines your tier: under 55 = $12,500 max; 55+ = $20,000 max
- 03Guard drill pay is taxable MD income — withhold MD taxes
Veteran-specific tax benefits
Disabled veteran property tax exemption.
Official authority
https://www.marylandtaxes.gov/ ↗State tax law changes annually. Verify current rules with the Maryland Department of Revenue before making any tax decision.
Maryland military tax — common questions
Does Maryland tax military retirement pay in 2026?
Maryland partially taxes military retirement pay. Subtraction: first $20,000 of military retirement excluded for those 55+; first $12,500 for under-55.
Does Maryland tax active-duty military pay?
Maryland taxes active-duty military pay for state residents. Active-duty pay taxable to MD residents. Under the SCRA, Maryland can only tax the military pay of service members who are legally domiciled in Maryland — not those merely stationed there.
Does Maryland tax National Guard and Reserve drill pay?
Maryland taxes Guard and Reserve drill pay. Guard and Reserve drill pay is taxable Maryland income. SCRA protections apply during federal activation but not routine drill.
Is VA disability compensation taxed in Maryland?
No. VA disability compensation is federally tax-free under 38 U.S.C. § 5301, and no state — including Maryland — taxes it as income.
If I'm stationed in Maryland but claim another state, can Maryland tax my military pay?
No. Under the Servicemembers Civil Relief Act (SCRA), active-duty pay is taxable only by your state of legal domicile, not the state where you are stationed. If your domicile is elsewhere, Maryland cannot tax your active-duty military pay. Military spouses get the same protection under the MSRRA.
Related tools
Other state guides