Source: https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/legal-publications/technical-bulletins/tb-58.pdf#page=1
Pages 1-1, text extracted with pdftotext (poppler), reading order.

Technical Bulletin No. 58
Effective December 29, 2025

Maryland Taxation of Individual Capital Gain
Income
I.

General

Generally, capital gain is the difference between the adjusted basis of the asset and the amount
realized from its sale. The Internal Revenue Code (“IRC”) distinguishes between long-term and
short-term capital gains and losses. If the asset is held for more than one year before disposition,
the capital gain or loss is long-term; if the capital asset is held for less than one year, the capital
gain or loss is short-term. 1 “Net capital gain” means the excess of the net long-term capital gain
for the taxable year over the net short-term capital loss for such year. 2
Until 2025, capital gains of individuals have been taxed in Maryland in the same manner and at
the same rate as ordinary income. In 2025, the Maryland General Assembly enacted legislation
that imposes an additional 2% tax on net capital gains included in Maryland adjusted gross
income. The tax is imposed on individuals with federal adjusted gross income (“FAGI”) in excess
of $350,000,regardless of filing status.
A fiduciary with federal taxable income in excess of $350,000 is subject to the additional tax on
net capital gain on undistributed capital gain income. 3 The additional tax on net capital gain also
applies to capital gain income that an individual with FAGI in excess of $350,000 receives from a
fiduciary or a pass-through entity (“PTE”). When a fiduciary distributes net capital gain income to
a beneficiary, the capital gain income is subject to the additional 2% tax if the beneficiary’s FAGI
is over $350,000. When a PTE distributes net capital gain income to an individual member whose
FAGI is over $350,000, the capital gain income is subject to the additional 2% tax. The additional
tax on net capital gain is not imposed on corporations.
The additional tax is imposed on net capital gain included in Maryland adjusted gross income.
Maryland adjusted gross income equals FAGI, further adjusted by Maryland additions and
subtractions. If the adjusted gross income of an individual or spouses filing a joint return exceeds
$350,000 and includes any amount of net capital gain, as determined under the Internal Revenue
Code, the State income tax for that individual or couple is the sum of: (1) the applicable income
tax rate applied to Maryland taxable income, plus (2) an additional 2% tax on net capital gain
included in the individual’s Maryland adjusted gross income. 4
II.

Exceptions

Capital gains attributable to the sale or exchange of the following assets are not subject to the
additional 2% tax:
A. Residential dwellings, including the land and any accessory dwelling unit
associated with the residence, if the dwelling meets all the following requirements:
1 See IRS Topic no. 409, Capital gains and losses: https://www.irs.gov/taxtopics/tc409
2 IRC § 1222(11).

3 The additional tax on net capital gain applies to “individuals” described in TG § 10-105(a)(1) and (2). Per
TG § 10-101(g), “individual” means, unless expressly provided otherwise, a natural person or fiduciary.
4 TG § 10-105(a)(3)(i).

Technical Bulletin No. 58 I Maryland Taxation of Individual Capital Gain Income

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