When you recruit senior leaders for Baltimore, compensation planning needs to account for a tax structure that stacks a state rate on top of a county or city rate. That stack changes the after-tax value of base, bonus, and equity, and it shows up fast at upper brackets. If you are calibrating offers for Baltimore, our Baltimore recruiters model the state and local layers so boards see the net number a candidate will actually spend and save.
Two layers that drive the net number
Maryland imposes a progressive state income tax and every county, plus Baltimore City, adds a resident “local income tax” as a percentage of Maryland taxable income. The Comptroller’s current guidance lists state brackets that now reach 6.25% and 6.50% at the top, and it shows the 2025 local rate schedule that ranges from 2.25% to 3.30% in the Withholding Tax Facts for 2025. Baltimore City’s resident rate is 3.20%, which means a City resident in a top state bracket can face a combined rate near ten percent before federal taxes are even considered. The Department of Legislative Services publishes a consolidated table of local rates that confirms Baltimore City at 3.20% for FY2025 and identifies jurisdictions that now use 3.30% in its county local tax rates sheet.
What changed for high earners in 2025
For executives, the important shift is the creation of new top state brackets. For single filers, Maryland’s schedule now applies 6.25% to taxable income above $500,000 and 6.50% above $1,000,000. For joint filers, 6.25% begins above $600,000 and 6.50% above $1,200,000, as shown in the Comptroller’s 2025 tables here. This is the practical meaning of a “millionaire tax” for offer design. It is not a separate surtax. It is a higher top bracket that catches cash bonuses, vesting events, severance, and other lump sums. When boards time equity vesting or sign-on payments without this in view, the candidate can experience a surprise and the acceptance rate falls.
City residency choices that move the effective rate
Because the local tax is charged where you live, not where the headquarters sits, two finalists with identical compensation can take home different net pay. A leader who lives in Baltimore City will see the 3.20% local rate. A leader who lives in a jurisdiction with a 2.40% or 2.65% rate will see a different outcome. That spread can be the difference between a yes and a no if the package is tight. We advise clients to model scenarios by likely neighborhoods and to memorialize tax assumptions in the offer letter so there is no confusion later.
Cross-border competition with D.C. and Northern Virginia
Regional competition complicates the picture. Washington, D.C. applies a top individual rate of 10.75% on taxable income above $1,000,000, which affects executives who might otherwise commute into Baltimore from the District per the Office of Tax and Revenue. Virginia caps its individual rate at 5.75% and does not layer on any county income taxes, a point the Virginia Department of Taxation explains in its guidance for individuals here and here. Baltimore employers win when they show the full net effect of offers relative to these alternatives and then use plan design to close any remaining gap.
Credits, nonresidents, and why structure matters
Most senior candidates have multistate income. Maryland residents receive credits to avoid double taxation of income taxed by another state, including on the local portion after the Supreme Court’s decision in Comptroller v. Wynne, which reshaped how local taxes interact with credits for out-of-state income as summarized by the Comptroller. Nonresidents with Maryland-source wages do not pay a local tax but do pay an additional state tax at 2.25% that functions as a proxy, which the Comptroller notes in the same 2025 guidance. This matters when a Baltimore-based executive keeps a home in Virginia or Delaware and splits time. The gross pay can match, yet the net will not, unless the package anticipates the filing mechanics.
Offer design that respects Baltimore realities
The right approach is simple. Start with the job to be done, then engineer compensation that delivers a target after-tax outcome with low friction. In Baltimore that means lining up the vesting calendar with bracket thresholds, avoiding the stack of a large cash bonus and a large vest in the same tax year, and using relocation and housing support in ways that do not unintentionally push a finalist into a higher local rate than they expected. It also means showing work. Executives respond well when an employer includes a one-page tax illustration with a link to the state’s estimated tax calculators, plus a footnote that reminds the candidate to confirm with their advisor.
Practical levers boards can use
- Shift a portion of sign-on cash into restricted stock that vests across tax years to smooth exposure to the 6.25% and 6.50% brackets shown in the Comptroller’s schedule.
- Offer a net-of-tax signing bonus and state clearly which state and local rates were assumed, with Baltimore City at 3.20% per the FY2025 tables.
- Consider a relocation allowance that reflects the local rate of the likely neighborhood, not just a generic state average.
- Use performance stock with cliff vesting that falls outside the year of a large cash event, or split vests into two calendar years to avoid stacking income.
- For nonresident finalists, model the 2.25% additional tax for Maryland-source wages and show how credits may apply if a spouse has income from another state.
Communication that earns trust
Tax complexity can feel like a black box. When an employer explains Maryland’s two-layer system in plain language, cites the source tables, and illustrates the after-tax effect over the first three years, candidates view the offer as thoughtful and predictable. That tone matters more than a small bump in headline pay. It also shortens time to acceptance because the finalist’s advisor can check assumptions against the official tables in one sitting.
What this adds up to for boards
Baltimore is competitive for leadership talent because the work is meaningful and the city’s assets are real. The tax structure is a fact to manage, not a reason to lose a hire. Use the state’s updated brackets and the local rate map to set the stage, then choose vesting, timing, and cash mix that protect the candidate’s after-tax outcome. The board gets certainty. The executive sees a path that respects their household decisions and their time. Most important, the company starts the relationship with clarity that lasts past the first filing season.
