Maryland Probate and
Inheritance Taxes

Yes. Maryland charges a 10% inheritance tax on property passing to anyone who is not an exempt relative. Close family members are exempt.

These recipients pay no Maryland inheritance tax: • Spouse or registered domestic partner • Children, stepchildren, grandchildren, and other lineal descendants • Parents, stepparents, and grandparents • Siblings • Spouses of children or of lineal descendants • A business owned entirely by exempt relatives Nieces, nephews, cousins, friends, and unmarried partners without a registered domestic partnership are not exempt.

A niece pays 10% of the net value she receives. Example: a niece inherits half of a house with a net value of $400,000. Her share is $200,000. Her Maryland inheritance tax is $20,000. Whoever you are in the family tree changes the math, so check before you plan around a number.

Yes. Property passing to any one person is exempt if the total value does not exceed $1,000. Life insurance paid to a named beneficiary other than the estate is also exempt, as are gifts to qualifying charities.

Yes. Maryland is one of the few states with both. The estate tax applies only to larger estates, with an exemption of $5 million per person. Most families selling a single inherited home never reach it. Confirm the current threshold with your CPA.

The step-up in basis resets the tax value of an inherited house to its fair market value on the date of death. Decades of appreciation during the parent's lifetime drop out of the capital gains calculation. Example: parents bought for $80,000 in 1985. The house was worth $500,000 when the last parent died. The heirs' starting basis is $500,000, not $80,000.

Usually little or none if you sell near the date of death value. The rough formula is sale price minus stepped-up basis minus selling expenses. Example: • Sale price: $520,000 • Stepped-up basis: $500,000 • Selling expenses: $30,000 • Result: $520,000 minus $500,000 minus $30,000 equals negative $10,000, so no gain Gains that build up after the date of death are taxable. Have a CPA confirm your numbers.

In most cases, yes. Maryland's Inventory must show the house's value as of the date of death, and appraisals using the word "approximate" are rejected. The appraisal also documents your stepped-up basis for capital gains. A real estate agent's market analysis is not a substitute for an appraisal on the Inventory.

Yes, in one situation. Maryland lets the Personal Representative use the contract sale price if it is an arm's length sale and settlement happens within one year after the date of death. Selling inside that first year often saves the cost of a separate appraisal.

Maryland allows it. The Personal Representative is able to use the full cash value from the state tax assessment instead of an appraisal. Be careful. Assessments often lag the market, and the Inventory number tends to follow the estate through inheritance tax and capital gains conversations. Talk to your CPA before choosing the cheapest option.

No. Costs to maintain and preserve the house are allowable estate expenses, but repairs or upgrades beyond that are not deductible for Maryland inheritance tax. They come out of the heir's distribution instead. For federal capital gains, improvements generally add to basis. Your CPA should confirm both.

Usually yes. The deceased person's final personal return covers January 1 through the date of death. If the estate earns income after death, such as rent or interest, the estate often files its own income tax return. Rent collected on an estate property must also be reported in the estate's accounts with the Register of Wills.