Recognized automaticallyPTET available

S-corp election in Maryland

In short

Mandatory nonresident-member pass-through entity tax (Form 510) plus an optional electing PTE tax on all members (Form 511). No franchise or net-worth tax, but a $300 SDAT annual report fee applies to every corporation and LLC.

Does Maryland recognize the federal S election?

Maryland automatically recognizes your federal S election — there is no separate Maryland S-corp election. Your S corp files Form 510 (Pass-Through Entity Income Tax Return) or Form 511 (Electing Pass-Through Entity Income Tax Return) each year. Maryland imposes a mandatory entity-level tax on the shares of NONRESIDENT members whether or not you elect anything, and separately lets you elect to pay the tax on ALL members' shares as a SALT-cap workaround. Every Maryland entity must also file a Form 1 annual report with SDAT.

Tax the entity still owes

All rates below are read directly from the CURRENT codified Maryland statutes at mgaleg.maryland.gov (Tax-General Article), which govern tax year 2026. NONRESIDENT PTE TAX (Form 510) — Tax-Gen. § 10-102.1(d)(1): the tax is the sum of (i) a rate equal to the § 10-106.1 rate PLUS the top marginal state rate for individuals under § 10-105(a), applied to nonresident individual members' shares of Maryland-source income, and (ii) the corporate rate under § 10-105(b) applied to nonresident ENTITY members' shares. ELECTING PTE TAX (Form 511) — § 10-102.1(d)(2): identical formula but applied to ALL members' shares of the entity's taxable income, not just nonresidents'. TOP INDIVIDUAL RATE — § 10-105(a): 6.50% of Maryland taxable income in excess of $1,000,000 (single/MFS/HOH) or in excess of $1,200,000 (joint/surviving spouse), with a 6.25% bracket immediately below ($500,001–$1,000,000 single; $600,001–$1,200,000 joint). SPECIAL NONRESIDENT TAX — § 10-106.1(b): the rate "shall be equal to the lowest county income tax rate set by any Maryland county" — it is a FORMULA, not a fixed statutory number. It has most recently been 2.25%, which yields a combined PTE rate of 8.75% (6.50% + 2.25%). CORPORATE RATE — § 10-105(b): 8.25%, applied to entity members' shares. CAP — § 10-102.1(d)(3): the PTE tax for a year may not exceed the members' shares of the entity's distributable cash flow. MEMBER CREDIT — § 10-102.1(e) and § 10-701.1: each member claims a credit for its proportionate share of tax paid by the entity. NEW 2% CAPITAL GAINS SURTAX — § 10-105(a)(3)-(4): for individuals with federal adjusted gross income over $350,000, an ADDITIONAL 2% applies to net capital gain included in Maryland AGI, with carve-outs for a primary residence sold under $1,500,000, retirement-plan assets (401(k), 403(b), 457(b), IRA, Roth IRA, defined benefit/contribution plans), certain farm livestock, easement-encumbered land, § 179 trade-or-business property, and nonprofit-owned affordable housing. This matters directly to an S-corp owner selling the business. SDAT ANNUAL REPORT: 2026 Form 1, Domestic or Foreign Stock Corporation — $300; Domestic or Foreign Limited Liability Company — $300; Domestic or Foreign Non-Stock Corporation — $0. Due April 15; a 60-day extension is available, extending to June 15.

Registering for payroll

An S corp paying wages must register with the Comptroller of Maryland for income tax withholding and with the Maryland Department of Labor for unemployment insurance, typically through the Maryland Business Express / Combined Registration Application at businessexpress.maryland.gov.

Annual filings

Form 510, Maryland Pass-Through Entity Income Tax Return — required of every pass-through entity doing business in Maryland; pays the mandatory nonresident-member tax. Form 511, Maryland Electing Pass-Through Entity Income Tax Return — filed instead if the entity elects to pay tax on all members' shares. Maryland Schedule K-1 (510/511) to each member. Estimated PTE payments may be required. SDAT FORM 1, Business Entity Annual Report and Business Personal Property Return — required of ALL domestic and foreign business entities formed, qualified or registered in Maryland; due April 15 (60-day extension available to June 15); $300 for a stock corporation or LLC. A Business Personal Property Return must ALSO be filed with Form 1 if the entity owns, leases or uses personal property located in Maryland, or maintains a trader's license with a Maryland local government.

Pass-through entity tax

Yes. Maryland has BOTH a mandatory and an elective entity-level tax and it is important not to conflate them. Under Tax-Gen. § 10-102.1(b)(2)(i) every pass-through entity MUST pay tax on its nonresident and nonresident-entity members' distributive shares (Form 510) — that is a withholding-substitute, not a SALT workaround. Under § 10-102.1(b)(2)(ii) the entity MAY ELECT to pay the tax on ALL members' shares, resident and nonresident (Form 511) — that is the SALT-cap workaround. The rate formula is the same for both: the § 10-106.1 rate plus the top individual rate under § 10-105(a) for individual members (8.75% when the § 10-106.1 rate is 2.25%), and 8.25% for entity members. Members claim the credit under § 10-701.1.

The mistake owners make most often in Maryland

Forgetting the SDAT Form 1 annual report, or assuming it is optional because the business owns no property. Every Maryland entity must file Form 1 by April 15 and pay $300 — separately from anything filed with the Comptroller — and late filers are penalized at 1/10 of one percent of the county assessment plus interest, with forfeiture of good standing if it persists. The second trap is treating the Form 510 nonresident tax as if it were the SALT workaround: it is mandatory and gives no federal SALT benefit to resident owners. Only the Form 511 election does that.

Filing your federal Form 2553

Businesses operating in Maryland send Form 2553 to the IRS Kansas City service center — fax 855-887-7734. Full address and filing checklist for Maryland.

Frequently asked questions

Does Maryland require a separate S-corporation election?

No. Maryland does not require a separate state election. Maryland automatically recognizes your federal S election — there is no separate Maryland S-corp election. Your S corp files Form 510 (Pass-Through Entity Income Tax Return) or Form 511 (Electing Pass-Through Entity Income Tax Return) each year.

What tax does an S corporation pay in Maryland?

Where do I file Form 2553 from Maryland?

With the IRS Kansas City service center. Fax 855-887-7734, or mail to Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999.

What is the most common S-corp mistake in Maryland?

Compare with other states: Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana.

Sources

File your Form 2553 correctly

Scorply completes your federal election and includes a Maryland guide in your packet, so you know exactly what else you owe here.

Start my Form 2553

Researched from official Maryland sources and verified July 30, 2026. State tax rules change. This is general information, not tax advice — confirm with the state or a CPA before you rely on it.