Locum Tenens Taxes in Maryland
Maryland is the only state in the DC metro that taxes you twice on the same return: once at state rates and again at your county's rate. Nonresident locums pay a special substitute rate instead, and the 2025 law changes raised the stakes for high earners.
TL;DR: Maryland, in 60 Seconds
Yes, Maryland taxes nonresident locum income earned in the state. Maryland residents pay state rates of 2% to 6.50% plus a county income tax of roughly 2.25% to 3.30% based on where they live. Nonresident locums skip the county tax but pay a 2.25% special nonresident tax on top of the state brackets, filed on Form 505. Reciprocity with DC, Virginia, Pennsylvania, and West Virginia covers W-2 wages only. And since tax year 2025, high earners face two new top brackets and a 2% capital gains surcharge.
How Maryland Taxes Locum Income
Most states have one income tax. Maryland effectively has 24: the state tax plus a separate local income tax for each of the 23 counties and Baltimore City. For a locum physician, that structure creates questions that do not exist in Virginia or DC: which county's rate applies, what happens when you work in Maryland but live elsewhere, and how the credit system handles income that crossed the Potomac.
The stakes went up recently. Maryland's 2025 budget legislation added a 6.25% bracket for taxable income over $500,000 and raised the top rate to 6.50% over $1,000,000 (with higher breakpoints for joint filers), and layered a 2% surcharge on net capital gains for taxpayers with federal AGI above $350,000. Combined with a 3.2% county rate, a high-earning Maryland-resident physician can face a marginal state-plus-local rate approaching 10%.
The good news: the system is entirely navigable once you know which layer applies to you. This guide covers both directions, nonresident locums working Maryland assignments, and Maryland-resident locums working across the DC metro.
2.25% to 3.30%
County income tax rates on Maryland residents (2026)
2.25%
Special nonresident tax rate, in lieu of a county tax
6.50%
New top state bracket (over $1M taxable income, TY2025+)
This guide is educational, not individualized tax advice. Every rate, threshold, and form reference requires verification against the current tax year. Confirm your specific numbers with a tax professional before filing or structuring an assignment.
Resident vs Nonresident Filing
Forms 502, 505, and the 505NR calculation
Maryland residents file Form 502 and report worldwide income, taxed at the state brackets plus their county's local rate. Nonresidents with Maryland-source income file Form 505, with the tax computed on Form 505NR. Maryland-source income for a locum means compensation for services physically performed in Maryland, whether paid W-2, 1099 direct, or through your own entity.
Like most states, Maryland uses your total income to set the rate, then applies it to the Maryland share. There is no day-count safe harbor for 1099 personal services income: a short assignment at a Baltimore or Bethesda hospital that produces income above the filing threshold creates a Form 505 obligation.
Maryland Filing Basics for Locum Physicians
The County Tax Layer
Maryland's local income taxes, and the 2.25% substitute for nonresidents
Every Maryland county and Baltimore City levies a local income tax on its residents, at rates that currently run from 2.25% to 3.30%. The tax is collected through the state return, and the rate that applies is set by where you live, not where you work. A physician living in Montgomery County (3.2%) who works assignments all over the state pays 3.2% on everything; moving to a lower-rate county changes the rate on everything.
For nonresidents, Maryland does something unusual. Since nonresidents have no Maryland county, the state charges a special nonresident tax, set at the lowest county rate (currently 2.25%), on Maryland taxable income. The practical effect: a nonresident locum's Maryland bill is the state bracket tax plus 2.25%, which makes Maryland meaningfully more expensive per assignment-day than Virginia at similar state rates.
| Physician | State layer | Local layer |
|---|---|---|
| MD resident, Montgomery County | 2% to 6.50% brackets | 3.2% county tax on all taxable income |
| MD resident, Worcester County | 2% to 6.50% brackets | 2.25% county tax on all taxable income |
| Nonresident locum (VA, TX, anywhere) | 2% to 6.50% brackets on MD-source income | 2.25% special nonresident tax on MD-source income |
When you compare a Maryland day rate against a Virginia or DC day rate, add roughly 2.25 percentage points to Maryland's state schedule before comparing. Two contracts that look identical pre-tax are not identical after Maryland's nonresident layer.
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Reciprocity and the DC/VA Cross-Border Rules
Who taxes what in the DC metro
Maryland has reciprocity agreements with the District of Columbia, Pennsylvania, Virginia, and West Virginia covering salaries and wages. A Maryland resident earning W-2 wages in Virginia (or vice versa) is generally taxed only by the home state, with the right exemption certificate on file with the employer.
As with every reciprocity agreement in the country, 1099 independent contractor income is not wages, so the agreements generally do not protect 1099 locums. A Virginia-resident 1099 locum working a Maryland assignment files Maryland Form 505 and pays Maryland's state brackets plus the 2.25% nonresident tax; a Maryland-resident 1099 locum working in Virginia files Virginia Form 763 and claims a Maryland credit.
DC is the special case: federal law bars the District from taxing nonresidents at all. A Maryland-resident locum working DC assignments, W-2 or 1099, owes no DC income tax and files no DC return. The income is simply taxed on the Maryland resident return at state plus county rates. If you live in Maryland, DC assignments are your simplest cross-border option; Virginia assignments add a second return but the credit largely evens things out.
The Wynne Rule: Your Credit Now Covers the County Layer Too
S-Corps, the PTET Election, and the 2025 Changes
Entity planning under Maryland's higher rates
The federal S-corp math (reasonable compensation plus distributions to reduce self-employment tax) works normally for Maryland locums. Maryland does not impose a California-style minimum franchise tax on S-corps, so the entity-level cost of the election is mostly compliance: payroll, the Maryland pass-through entity return, and bookkeeping discipline.
Maryland also offers an elective pass-through entity tax (PTET), filed on Form 511. The entity pays Maryland tax on behalf of its owners at a rate tied to the top state rate plus the lowest county rate, the owners claim a corresponding credit, and the entity-level payment is deducted federally against business income without running through the individual SALT cap. Given Maryland's high combined resident rates, the election can be worth real money for a profitable locum S-corp, but the exact rate and mechanics should be verified for the current year before electing.
One 2025 change worth a note for high earners: the new 2% surcharge on net capital gains applies to taxpayers with federal AGI above $350,000. It mostly affects investment income rather than assignment income, but a locum who sells appreciated investments or a rental property in a high-income year will feel it.
If you are a Maryland resident, your county is a genuine planning variable. The local rate is set by where you live, not where you work, and the spread between counties is meaningful at physician income. Nobody should move over the local tax alone, but if a move is already on the table, the county rate belongs in the analysis alongside housing costs and commute.
Worked Example: MD Resident Working VA and DC Assignments
Illustrative numbers, not a specific client outcome
Illustrative example, not a specific client outcome. An emergency medicine locum lives in Silver Spring (Montgomery County, 3.2% local rate) and earns $300,000 of 1099 income: $140,000 from Maryland hospitals, $100,000 from Virginia assignments, and $60,000 from a DC assignment.
| Income slice | Filing consequence | Approximate result |
|---|---|---|
| $140,000 Maryland assignments | Maryland resident return (Form 502) | State brackets plus 3.2% county tax |
| $60,000 DC assignment | No DC return; DC cannot tax nonresidents | Taxed by Maryland at state plus county rates |
| $100,000 Virginia assignments | Virginia Form 763 first, then MD credit | VA tax roughly $5,700 at ~5.75% (illustrative) |
| Maryland credit for VA tax | Form 502CR, against state and county layers | VA's ~5.75% is below MD's combined ~8%+ rate, so the credit is fully absorbed and Maryland collects the difference |
The takeaway: for a Maryland resident, working in a lower-tax neighbor does not reduce total tax. The Virginia slice ends up costing the same combined rate as Maryland work, just split between two states (Virginia gets its 5.75%, Maryland collects the rest through the credit mechanism). The DC slice is administratively cleanest but is taxed identically to Maryland work. Where the planning leverage actually lives is in entity structure, the PTET election, retirement plan design, and estimated payment discipline, not in chasing assignments across the metro's borders.
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Common Mistakes
What trips up locums dealing with Maryland
Mistake 1: Forgetting the Second Layer
Mistake 2: Sloppy Cross-Border Mechanics
And a scope note: if your assignment mix reaches beyond the DC metro, into high-rate states like California or no-tax states like Texas and Florida, the planning gets more valuable, not less. The bigger the rate spread across your states, the more an assignment-calendar-aware tax plan is worth. That is the core of our multi-state tax service.
Frequently Asked Questions
Related Resources
The other side of the DC-metro border: Form 763, reciprocity, and the reverse-credit trap.
Complete Locum Tenens Tax GuideThe full framework for 1099 locum tax planning, entity choice, and deductions.
Multi-State Tax ServicesHands-on filing and planning when your income crosses state lines.
How your tax home affects travel deductions and state residency planning.
Locum Tenens Taxes in MinnesotaHigh rates, nonresident thresholds, and the reciprocity agreement that no longer includes Wisconsin.
CPA for PhysiciansDedicated tax planning and prep for physicians, including 1099 locums.
Don't Let the County Layer Catch You Off Guard.
We work with locum physicians across the DC metro who deal with Maryland's state, county, and nonresident layers every year. We'll map your assignment calendar, estimate what Maryland will actually claim, and check whether the PTET election pays for itself in your situation.
Book a Free Initial ConsultationNo obligation • Takes 30 minutes • Done over the phone