Maryland Cost Segregation and Tax Planning: State Rules
By AE Tax Advisors · Published 2026-01-06 · Updated November 8, 2026.
Maryland real estate and business planning requires a state calculation alongside the federal return. A cost segregation study does not establish the current Maryland deduction, and an entity-level payment does not necessarily cover every owner tax.
Reconcile depreciation and basis
Maryland decouples from specified federal depreciation provisions. Use the applicable Form 500DM instructions and asset history to calculate additions, later subtractions and disposition adjustments. Do not assume that federal bonus produces an identical immediate state deduction.
Keep land, components, service dates and federal and state basis schedules together. Owner-level loss limitations also remain relevant.
Use the right state and local tax year
Maryland's 2025 legislation introduced additional high-income brackets and a capital-gain surtax for tax years beginning after December 31, 2024. The changes did not first begin in 2026. Local rates also depend on the jurisdiction and tax year.
The additional 2% tax on qualifying net capital gains generally applies to individuals with federal AGI above $350,000, subject to specific exceptions. It is not a tax on every dollar of sale proceeds, and asset character matters.
Check the 2026 PTE transition
The Comptroller's April 2026 alert explains that changes to the electing PTE tax base were postponed to 2027. For 2026, the electing entity continues to use Maryland-attributable income for resident and nonresident members under the stated rules.
The alert also provides a special 2026 election treatment following the first-quarter payment. Review the actual filings and payments rather than assuming an early selection fixed the election for the year.
Separate entity and owner obligations
PTE calculations depend on member type and the applicable rates. The individual capital-gain surtax is not part of the PTE tax computation. An owner's PTE credit therefore does not automatically satisfy the additional capital-gain tax.
Coordinate estimates, K-1 reporting, credits and any PTE overpayment. Compare the entity-level federal deduction with the complete owner result rather than treating the payment itself as a saving.
Prepare the review file
Bring federal and Maryland returns, depreciation schedules, local residence information, member details, election records and planned sales. Book a Cost Seg Discovery Call before relying on a study or PTE projection.
Frequently Asked Questions
Does Maryland use the federal bonus deduction unchanged?
Not automatically. Calculate applicable state decoupling adjustments and maintain a separate basis history.
Does a PTE payment cover the owner’s capital-gain surtax?
Not automatically. The additional tax is evaluated at the individual level under the applicable rules.
Sources and review notes
Reviewed November 8, 2026 by AE Tax Advisors. Examples are illustrative; apply the rules to the relevant tax year and records. See our editorial policy.