As part of the FY 2026 State Budget, the final version of the Budget Reconciliation and Financing Act makes several changes, all which became effective June 1, 2025.

• Itemization: Increasing the standard deduction by 20%, while gradually phasing out itemized deductions for those with adjusted gross incomes above $200,000

• Income Taxes: Adds two new income tax brackets:

1. 6.25% for single filers of $500,000-$1 million and joint filers of $600,000-$1.2 Million

2. 6.5% for single filers above $1 million and joint filers above $1.2 million

• Capital Gains: Establishes a 2% surcharge on net capital gains if adjusted gross income is above $350,000. This does not apply to the gains from the sale of real property used as a primary residence sold for less than $1.5 million.

• Technology Taxes: Imposes a 3% tax on data and IT services provided within Maryland, based upon federally defined categories, while excluding certain cloud computing, cyber security, and other emerging technology services.

• Removal of Tax Exemptions: Repeals current exemptions for sales of photography used in advertising, sales of coins or bullion over $1,000, and vending machine sales.

• Local Income Taxes: Local governments are authorized to increase the local income tax rate from 3.2% to 3.3%.

• New vehicle fees and taxes: Includes increases to increase:

1. titling fees to $200;

2. excise tax rates to 6.5%;

3. annual registration fees for passenger, truck, multipurpose and rental vehicles;

4. rental car taxes to 3.5%; and,

5. $5 fee per tire purchased.