What payroll deductions are employers required to withhold?

Maryland Payroll Tax Deductions Employers Must Withhold

In Maryland, employers are responsible for withholding specific payroll taxes from employee wages to ensure compliance with state and federal regulations. Proper withholding supports accurate payroll processing, tax reporting, and remittance.

Required Payroll Deductions

• Federal Income Tax: Employers must withhold federal income tax based on IRS tax tables and employee Form W-4 information.
• Social Security Tax: Withhold 6.2% of wages up to the federal wage base limit, matching this amount as the employer.
• Medicare Tax: Withhold 1.45% of all wages with no wage base limit, also matched by the employer. Additional Medicare tax of 0.9% applies to employee wages above $200,000 and must be withheld by the employer.
• Maryland State Income Tax: Employers must withhold state income tax according to Maryland withholding tables, which vary by filing status and allowances claimed on the Maryland Form MW507.
• Local Income Tax: Maryland requires withholding of local county or Baltimore City income tax. The rate depends on the employee’s work location or residence within Maryland’s 23 counties or Baltimore City.
• Unemployment Insurance Contributions: While unemployment insurance is generally paid by employers, no employee withholding is required for this tax in Maryland.

Operational Considerations

• Regular Updates: Tax rates and withholding tables can change annually. As of 2026, always verify current rates with the Maryland Comptroller’s office and IRS resources.
• Payroll System Configuration: Ensure payroll software or service is set up to accurately calculate and withhold federal, state, and local taxes automatically.
• Employee Recordkeeping: Maintain up-to-date withholding certificates (Form W-4 and Maryland MW507) to reflect employee withholding preferences and exemptions.
• Timely Remittance: Submit withheld taxes to the appropriate agencies on schedule to avoid penalties and ensure compliance.
• Reporting Requirements: File quarterly payroll reports with the Maryland Department of Labor and annual filings with the IRS and Maryland Comptroller.