State guide · Maryland · 2026 rules

S corporation in Maryland: what the election changes

Maryland adds little to the S-corp math for a one-owner business with a Maryland-resident owner. The state change is unemployment tax on your salary, with paid leave contributions to come in 2027.

Updated October 24, 202613 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The state

Maryland follows the federal S election; there is no state election form. Maryland does not tax an S corporation’s income, except a tax on the shares of owners who live outside Maryland. A one-owner S corporation with a Maryland-resident owner owes no entity income tax.

You pay state and county income tax on the business income either way. Today it is your profit; after the election it is your salary plus your share of the S corporation’s income. County rates run from 2.25% to 3.30%.

An LLC that elects stays an LLC and keeps paying the $300 annual report fee. A sole proprietor must first form an LLC or corporation, which starts the same $300 fee.

Payroll taxes on your salary

Unemployment insurance: new-employer rates range from 1.0% to 2.6% on the first $8,500 of wages in 2026. The calculator uses 2.6%. Maryland presumes work done for wages is covered and lists no exclusion for a corporate officer.

Maryland’s paid family and medical leave program (FAMLI) starts contributions with wages paid in January 2027. The rate is 0.9% of wages, split 0.45% employer and 0.45% employee. An employer with fewer than 15 employees remits only 50% of the rate. It does not apply in 2026.

The optional pass-through entity tax

An S corporation can elect to pay Maryland tax for its owner at 8.75%: the top individual rate of 6.50% plus the lowest county rate of 2.25%. It files Form 511, and you claim a credit for the tax paid. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	Statewide
$80,000 / $45,000	$753 lower
$120,000 / $60,000	$3,154 lower
$200,000 / $90,000	$7,934 lower

Starting payroll in Maryland

Register for state income tax withholding with the Comptroller of Maryland through its combined registration, and for unemployment insurance with the Maryland Department of Labor, Division of Unemployment Insurance.

New hire paperwork for Maryland

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status