The US federal government implements capital gains tax in all states, and Maryland is no exception. Maryland's capital gains tax is governed and regulated by the Internal Revenue Services (IRS). There are some techniques provided by the IRS to defer or reduce the tax on profit earned from the sale of capital assets. The measures that the tax payers may use to defer the capital gains tax in Maryland are: deferred sales trust, 1031 Exchange, charitable trust, installment sale, structured sale annuity, and private annuity trust.
Capital assets, trading of which may be taxable in Maryland are: land, real estate property, currency, stocks, bonds, and mutual funds. The capital assets may be either long term assets or short term assets. Capital assets that are held for more than one year are referred to as long-term assets, while assets held for less than that period of time are short-term assets. Short-term assets are taxed at the ordinary income tax rate, while long-term assets are taxed at various rates. Since 2003, long term assets are taxed at the rate of 15% while, individuals falling in the lowest two income brackets are required to pay 5%. According to federal tax law, the long-term capital gains tax rate will increase to 20% in 2011, which was the prevailing rate in the state prioro to 2003.
For most states in the US, the top marginal tax rates for ordinary income and capital gains are same. The seven states in the USA with top marginal tax rates of 7.75 percent or more are California, Idaho, Iowa, Illinois, Minnesota, North Carolina and Maryland.
