If you own a business in Maryland, a tax change from 2025 quietly raised your bill, and most owners have not run the numbers on it yet.
In May 2025, Governor Wes Moore signed the Budget Reconciliation and Financing Act of 2025. It did two things that matter to high-income owners. It added new income tax brackets at the top. And it created a brand new 2 percent surtax on capital gains. Both took effect for the 2025 tax year, so they are hitting the return you will file next spring.
What actually changed
Two pieces to know.
First, the brackets. Maryland added a 6.25 percent rate on taxable income between $500,001 and $1 million (between $600,001 and $1.2 million for joint filers). It also raised the top rate to 6.5 percent on income above $1 million ($1.2 million for joint filers). The old top rate was 5.75 percent.
Second, the capital gains surtax. Maryland now charges an extra 2 percent on your net capital gains if your federal adjusted gross income is above $350,000. This is on top of your regular Maryland income tax on that gain, not instead of it. (Source: Maryland Comptroller, Technical Bulletin No. 58, and the Comptroller's 2025 legislative session tax alert.)
A few things are carved out. Gains inside retirement accounts are exempt. So is the gain on a primary home sold for less than $1.5 million.
Why this matters most the year you sell
The surtax is easy to shrug off if you only think about your regular yearly income. Two percent on normal investment gains is real money, but it is not dramatic.
The year you sell your business is a different story.
A business sale usually lands as one large capital gain in a single tax year. That is exactly the event this surtax was built to catch. Say you sell for a $2 million gain. That extra 2 percent is $40,000, filed on top of everything else you already owe. And because a sale spikes your income for that year, it can push the rest of your income into the new 6.25 or 6.5 percent brackets at the same time.
So the owner planning an exit in the next few years now has two new costs stacked on the same transaction: a higher top bracket and a 2 percent surtax on the gain itself.
What to actually do about it
You do not need to panic, and you do not need to move to Virginia. You need to plan for it before the sale year, not during it.
A few levers that matter here:
- How the deal is structured. Asset sale versus stock sale, and how the price is allocated, changes how much of the proceeds get taxed as capital gain in one year.
- Timing. Spreading a sale across tax years, or using an installment structure, can keep more of the gain out of a single spike year.
- Your AGI in the sale year. The surtax keys off the $350,000 federal AGI line. What else lands in that same year affects the whole picture.
None of these are things you decide the week you sign. They are decisions you make one, two, or three years ahead, which is exactly why so many owners miss them.
Most general accountants are filing your return, not planning the year you exit. Those are two different jobs. If you own a Maryland business and think a sale is anywhere on your horizon, it is worth knowing what this change costs you before you are standing at the closing table. And if you operate in Virginia or DC, this surtax does not touch you, which is exactly why state lines have become a real planning variable for owners near the borders.
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