If you own a practice in Maryland, a 2025 tax change 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, which added new top income tax brackets and a 2 percent surtax on capital gains.
Two pieces to know. First, the brackets: a 6.25 percent rate on taxable income between $500,001 and $1 million ($600,001 to $1.2 million joint), and a 6.5 percent top rate above that, up from the old 5.75 percent. Second, the surtax: an extra 2 percent on net capital gains if your federal AGI is above $350,000, on top of regular Maryland income tax. Retirement-account gains and a primary home sold under $1.5 million are exempt.
The surtax is easy to shrug off if you only think about yearly income. The year you sell your practice is a different story. A sale usually lands as one large capital gain in a single tax year, which is exactly the event this surtax was built to catch.
On a $2 million gain, that extra 2 percent is $40,000, and the income spike can push the rest of your income into the new 6.25 or 6.5 percent brackets at the same time.
You do not need to move to Virginia. You need to plan before the sale year. Deal structure, timing across tax years, and your AGI in the sale year all change the number. And if you operate in Virginia or DC, this surtax does not touch you, which is why state lines have become a real planning variable near the borders.