Taxes may be the deal-maker or deal-breaker for people or businesses planning to relocate to Maryland or Virginia, especially those whose interests focus on the Washington, D.C. area. The Washington, D.C. metropolitan area includes parts of both states. Tax Freedom Day, when "Americans finally have earned enough money to pay off their total tax bill for the year," arrives on April 13 in Virginia, according to the Tax Foundation; but Marylanders must wait until April 19.
Sales and Use Tax
Maryland's state sales and use tax is six percent, while Virginia charges five percent, divided between a four percent state sales tax and one percent local tax. Maryland excludes items such as food purchased in grocery stores, newspapers and prescription medications from sales tax. The state has no other local sales taxes. Virginia does not impose sales tax on medications, but charges a lower rate of 2.5 percent on food purchased in grocery stores.
In 2010, Maryland's individual income tax rates begin at two percent on the initial $1,000 of taxable income, increasing up to 6.25 percent on incomes of more than $1 million. In addition to state income taxes, Maryland charges nonresidents a special tax of 1.25 percent. Baltimore City and the state's 23 counties levy local income taxes collected on the state tax return "as a convenience to local governments." The state provides income tax benefits for several categories of residents, including those ages 65 and up, military veterans, low- income families and working parents paying for child care.
Virginia assesses two percent on the initial $3,000 of income, three percent on income between $3,001 and $5,000, five percent on income between $5,001 and $17,000, and six percent on income over that amount.
The Maryland Department of Assessments and Taxation determines property tax assessments in Maryland counties and incorporated cities. Property tax rates vary between the individual counties and municipalities. Low-income homeowners may qualify for the Homeowners Tax Credit. Virginia counties determine property tax assessments and rates also vary depending on the location.
Maryland imposes taxes on estates valued at more than $1 million. The tax is imposed on Maryland residents or non-residents owning real estate or personal property in Maryland. The estate tax rate is 16 percent of the amount exceeding $1 million.
Virginia does not impose an estate tax.