Home Individual Taxes Estate and Inheritance Tax Frequently Asked Questions about Estate and Inheritance Tax Frequently Asked Questions about Estate and Inheritance Tax 1. What is the Maryland estate tax? What is the tax rate? The Maryland estate tax is a transfer tax imposed on the transfer of assets from an estate. It is based on the maximum credit for state death taxes allowable under §2011 of the Internal Revenue Code. The credit used to determine the Maryland estate tax cannot exceed 16% of the amount by which the decedent's taxable estate exceeds the Maryland estate tax exemption amount for the decedent's year of death. Please note, for decedents dying after December 31, 2001, the maximum allowable credit for state death taxes will not be reduced, for purposes of the Maryland estate tax, by any act of Congress enacted on or after January 1, 2001. If the inheritance tax paid is equal to or exceeds Maryland's determination of the credit for state death taxes, no Maryland estate tax is due. See also Calculation Method. 2. Who is responsible for filing the Maryland estate tax return? The duly appointed personal representative of the decedent's estate must file the return. If there is more than one personal representative, the return must be made jointly by all. If there is no personal representative appointed, every person in actual or constructive possession of any property of the decedent is required to make and file a return. See FAQ #3, “What are the requirements for filing a Maryland estate tax return?” to determine if you are required to file. 3. What are the requirements for filing a Maryland estate tax return? The filing requirement varies depending on the year of the decedent's death. Generally, a return is required for every estate whose federal gross estate, plus adjusted taxable gifts, plus property for which a Maryland Qualified Terminal Interest Property (QTIP) election was previously made on a Maryland estate tax return filed for the estate of the decedent's predeceased spouses, equals or exceeds the Maryland estate tax exemption amount for the year of the decedent's death, and the decedent at the date of death was a Maryland resident or a nonresident but owned real or tangible personal property having a taxable situs in Maryland. Year of death Gross estate 2019 and after $5,000,000 2018 $4,000,000 2017 $3,000,000 2016 $2,000,000 2015 $1,500,000 2002-2014 $1,000,000 2000-2001 $675,000 1999 $650,000 Prior to 1999 Contact us For more information, see Filing the Estate Tax Return 4. How do I file the Maryland estate tax return? And when? Once you have determined a Maryland estate tax return is required to be filed for the estate, complete the federal estate tax return, IRS Form 706, for the date of the decedent's death. You will be required to complete the federal return even though you may not be required to file the return with IRS. Using the information from the federal return, complete the Maryland estate tax Form MET-1, using the form appropriate for the date of the decedent's death. See Maryland Estate and Fiduciary Forms for a list of MET-1 forms. File the return within nine (9) months after the decedent's date of death, or by the approved extension date. The Maryland estate tax return must be filed directly with the Comptroller of Maryland. The Comptroller of Maryland will submit the MET-1 to the Register of Wills for certification on Section III. Include the federal return, complete with all schedules, attachments and supporting documents when filing the Maryland estate tax return. In all cases, you must submit a certified death certificate, the last will and testament and any applicable trusts. The Maryland estate tax is payable to the Comptroller of Maryland. Mail the estate tax return and payment to: Comptroller of Maryland Estate Tax Section P.O. Box 828 Annapolis, MD 21404-0828 The Comptroller will send the return to the Register of Wills for completion of Section III to certify the payment of inheritance taxes. 5. Can I get an extension to file the Maryland return or pay the Maryland estate tax? The Comptroller of Maryland may extend the time to file an estate tax return up to six months, or up to one year if the person required to file the return is out of the United States. There are also provisions for granting an alternative payment schedule for the tax payment. The request for an extension must be in writing and filed on or before the due date of the Maryland estate tax return. The request must include: Completed Form MET-1E, Application For Extension of Time to File the Maryland Estate Tax Return. A copy of the federal extension application Form 4768 including attachments, if applicable. Remittance of estimated Maryland estate tax, unless estimated tax calculation shows no tax due or an alternative payment schedule is also requested. If the estate is otherwise not required to file in Maryland (i.e. Federal gross estate of the decedent is under the Maryland filing threshold for the year of death of the decedent), but will be filing for portability purposes only, a MET1-E is not required to be filed to request an extension. In these specific cases, the MET1 must be filed within two years of the date of death of the decedent in order to be considered timely for portability purposes. For more information, see Request an Extension. 6. What recent legislative changes affect the Maryland estate tax? 2018 legislation established portability for Maryland estate tax purposes. Surviving spouses may elect to claim any unused portion of their predeceased spouse’s unused Maryland estate tax exemption under certain circumstances. 2020 legislation clarified that a Maryland estate tax return filed only for electing portability may be filed up to two years after the death of the decedent. Legislation enacted during the 2018 legislative session decouples the Maryland exclusion amount from the federal amount, decouples Maryland from the federal unified credit and established portability. The Maryland Estate Tax-Unified Credit Act altered the unified credit used for determining the amount that can be excluded for Maryland estate tax purposes. The unified credit is equal to The amount that can be excluded for decedents dying on or after January 1, 2019 is $5.0 million. The Maryland exclusion amounts for decedents dying before January 1, 2019 remain the same: (1) $1.5 million for a decedent dying in calendar year 2015; (2) $2.0 million for a decedent dying in calendar year 2016; (3) $3.0 million for a decedent dying in calendar year 2017; (4) $4.0 million for a decedent dying in calendar year 2018. 7. What about the inheritance tax? The inheritance tax is collected by the Register of Wills located in the county where the decedent either lived or owned property. The tax is imposed on the clear value of property that passes from a decedent to certain beneficiaries. It is levied on property that passes under a will, the intestate laws of succession, and property that passes under a trust, deed, joint ownership, or otherwise. For more information, contact the Office of the Register of Wills. 8. What if Maryland inheritance and estate taxes are both due? Isn't that double taxation? The inheritance tax paid to the Register of Wills is subtracted from the gross Maryland estate tax liability and the difference is the Maryland estate tax due. If the inheritance tax paid is equal to or exceeds Maryland's determination of the credit for state death taxes, no Maryland estate tax is due. However, the Maryland estate tax is owed and due until the inheritance tax is actually paid. If the amount of inheritance tax paid to the Register of Wills on or before the due date of the Maryland estate tax return is less than the gross Maryland estate tax liability, interest and/or penalty will be assessed on the outstanding liability. Interest will continue to accrue until the inheritance tax paid equals or exceeds the outstanding estate tax liability. See Comptroller of the Treasury v. Jameson, 332 Md. 723, 633 A.2d 93 (1993). For example, Estate owes $150,000 of estate tax, due by the nine (9) month statutory due date of January 1, 2014. Estate made two $75,000 payments of inheritance tax, one on December 1, 2013, and one on February 1, 2014. Because only $75,000 was paid by the estate tax due date, interest will be due on the remaining $75,000 from January 1, 2014 through February 1, 2014 when the amount of inheritance tax paid to the Register of Wills equaled the Maryland estate tax liability. 9. Are there interest or penalty charges for late payment of the tax? Yes. Maryland law imposes mandatory interest and late payment penalty if the tax is not paid when due. Interest is assessed on any portion of the liability that is not satisfied by the statutory due date, notwithstanding the fact that the tax is paid pursuant to an approved alternative payment schedule. A penalty of up to 10% is charged on any Maryland estate tax not paid by the due date. 10. Can I request a waiver of penalty? Yes. However, penalty may only be waived for reasonable cause. Under current case law, this is a high bar to clear. Merely forgetting to file a return, or accidentally filing the return a day or a few days late, is not reasonable cause. Absence of actual knowledge of the due date of an estate tax return or even the fact that a return was required to be filed is not reasonable cause for failure to file and pay the tax so as to be entitled to a waiver of the penalty. Failure to file a return or pay the estate tax timely is not excused by reliance on an agent, such as an accountant or attorney. The responsibility for filing the estate tax return and paying the tax belongs to the personal representative. Reasonable cause can be established by demonstrating, with affirmative proof, that the taxpayer exercised ordinary business care and prudence in the filing of the estate. For example, in Comptroller of the Treasury v. Taylor, 465 Md. 76, the Maryland Court of Appeals found reasonable cause to waive penalty when the taxpayer put forth a coherent legal argument, based on the peculiar facts of the case, that certain property was excludable from the Maryland estate. Even though the argument was ultimately unsuccessful, the Court found that it was permissible to waive penalty. Decisions on requests for penalty waivers are made on a case by case basis. 11. I don't recall receiving a refund in that amount. How can I verify that it was issued? If you requested a refund check, you can request a photocopy of the cancelled check. If you requested a direct deposit to your bank account, you would have to check your bank statement and account information. 12. How are personal representatives affected by state income tax? Fiduciaries who are personal representatives of estates are subject to the Maryland income tax - as well as the Maryland inheritance tax - and may have to file Maryland Form 504 and pay the Maryland income tax. Maryland follows federal rules for filing and paying estimated taxes. Personal representatives are exempt from paying estimated taxes during the first two taxable years of the estate. See also Fiduciary Information on the Tax Information page. 13. If I open and close the estate in the same year, am I required to file a Maryland income tax fiduciary return? If the estate is opened and closed in the same year, you are only required to file a Maryland income tax return if you filed a federal fiduciary return and have Maryland taxable income. Generally, there is no Maryland taxable income if all the income is distributed during the estate closure. Information must be provided to the beneficiaries so that they can file an accurate Maryland return. This includes information on Maryland source income and addition and subtraction modifications. 14. What Maryland forms are needed to meet these fiduciary filing requirements? Personal representatives and trustees must file Maryland Form 504 to pay the Maryland income tax. Fiduciaries paying estimated taxes must file Maryland Form 504D provided by the Maryland Revenue Administration Division. See also Fiduciary Information.