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Governor Wes Moore’s Fiscal Year 2026 Budget Proposal: Significant Changes to Maryland Taxes

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Governor Wes Moore’s Fiscal Year 2026 budget proposal has significant changes to Maryland Taxes. Here are the changes and the potential implications.

Elimination of Inheritance Tax

Maryland imposes a 10% inheritance tax upon death when assets are transferred to certain beneficiaries like nieces, nephews, friends, and other more distant relatives. Governor Moore’s proposal would be to eliminate this tax. This tax provides funding for the register of wills. The register of wills plays a vital role in the estate administration and probate process. With the inheritance tax covering approximately 90% of the register of wills revenue, there is concern about what this means for probate proceedings moving forward.

Reduction of the Estate Tax Exemption

Governor Moore’s proposal seeks to reduce the exemption from $5 million down to $2 million. This means that if your assets are worth more than $2 million at your death, then there could be estate tax due at a rate of 16%. To determine if you have more than $2 million, you simply add everything you own: real estate, investments, life insurance death benefits to name a few. You subtract debts. If you have more than $2 million, the excess would get taxed.

  1. Gifting strategies
  2. Implementing certain trusts
  • Implementing spousal planning to include the use of the unlimited marital deduction and portability.

Income tax

Governor Moore’s proposal consolidates lower income tax brackets to a rate slightly below 4.75%. There are also new tax brackets that are introduced: a 6.25% rate for those making at least $500,000 and 6.5% for incomes over $1 million. Previously, the highest rate was 5.75% for incomes starting at $250,000

Higher tax on certain sectors:

  1. Table games in casinos from 20% to 25%
  2. Sports betting from 15% to 30%
  3. Recreational cannabis 9% to 15%

Recent Developments:

  1. It is likely that the proposal will exclude the previously considered business to business service tax and the previously considered tax on sugary drinks.

These changes are not set in stone as these tax reforms are part of Maryland’s FY26 budget and would need to be approved by the Maryland General Assembly. However, it still could be a good idea to review your estate plan prior to these potential changes taking place. Call  Sinclair Prosser Gasior at (410) 573-4818 to discuss your options with an experienced Estate Planning attorney.

Alexander M. Pagnotta, Estate Planning Attorney
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