Do I have to pay taxes on an inherited house in Baltimore?

If you own a house in Baltimore, MD and you are dealing with inherited property, this page covers what actually happens next — the local timeline, what it costs, and the options that stay open to you. Everything below is specific to Baltimore and how sales are handled in MD, not generic national advice.

Direct Answer

Whether you must pay taxes on an inherited house in Baltimore depends mainly on your relationship to the person who passed away. Maryland is the only state in the country that has both an Inheritance Tax and an Estate Tax, but most close family members (like children and spouses) are exempt from the inheritance portion. You will, however, be responsible for ongoing Baltimore City property taxes and potential capital gains taxes if you choose to sell the home later for more than its value on the date of death.

Key Details

Inheriting a home involves four main types of taxes. Understanding each will help you avoid surprises and manage the property correctly.

1. Maryland Inheritance Tax

Maryland law (Tax-General § 7-204) imposes a 10% tax on the "clear value" of inherited property. However, many people never have to pay this because of a long list of exemptions. You are exempt (you pay 0%) if you are the deceased person's spouse, child, grandchild, parent, grandparent, sibling, or step-parent. You also do not pay if you are a domestic partner or a non-profit organization. You do have to pay the 10% tax if you are a niece, nephew, cousin, friend, or more distant relative. The tax is based on the value of the house at the time of death minus any debts like a mortgage.

2. Maryland Estate Tax

While the Inheritance Tax is paid by the person receiving the house, the Estate Tax is paid by the estate itself before you get anything. In Maryland, this tax only applies if the total value of everything the person owned (house, cash, stocks) is more than $5 million. If the estate is smaller than $5 million, no Maryland Estate Tax is due. If it is larger, the tax rate starts at 0.8% and can go up to 16%.

3. Federal Capital Gains Tax (Stepped-Up Basis)

One of the biggest tax benefits of inheriting a house is the "stepped-up basis." When you inherit a house, the IRS treats the value of the home as if you bought it on the day the previous owner died. For example, if your parents bought the house in 1970 for $20,000, but it was worth $300,000 when they passed away, your new "basis" is $300,000. If you sell the house immediately for $300,000, you pay $0 in capital gains tax. You only pay tax on the profit you make after you inherited it.

4. Baltimore City Property Taxes

Once the house is in your name, you are responsible for the annual property taxes. Baltimore City has one of the highest property tax rates in Maryland, currently around $2.048 per $100 of assessed value. If the house was the previous owner's primary residence, they likely had a "Homestead Tax Credit" which limited how much the taxes could go up each year. When you inherit the house, you must re-apply for this credit if you plan to live there, or the taxes could jump up to the current market rate.

MD-Specific Laws

The Probate Process

In Maryland, the legal process of transferring a house after death is called probate. This is handled by the Register of Wills. There are two main types:

• Small Estate: If the total value of all assets (not just the house) is $50,000 or less ($100,000 if a spouse is the only heir), you can use the small estate process. This is faster and involves fewer forms.
• Regular Estate: If the assets are worth more than the small estate limits, you must go through the regular probate process, which typically takes 9 to 12 months. You will need to file an inventory and several accountings showing the value of the house.

Transfer Methods

Maryland recently updated its laws regarding how houses transfer. While "Life Estate Deeds" have been the traditional way to avoid probate, a new law effective October 1, 2026, will officially authorize "Transfer-on-Death Deeds" (TOD deeds). These allow a homeowner to name a beneficiary on the deed itself, so the house skips the probate court entirely when they die.

Baltimore Local Context

Register of Wills

If you are dealing with an inherited house in the city, your home base is the Baltimore City Register of Wills, located at 111 North Calvert Street, 3rd Floor, Baltimore, MD 21202. They oversee the Orphans' Court and are responsible for appointing the Personal Representative (executor) who has the legal power to sign a new deed for the house.

Homestead Tax Credit and Local Relief

Baltimore City is currently working on a property tax relief strategy. Mayor Scott has proposed lowering the homeowner tax rate to $1.99 per $100 of value by July 2027. If you inherit a house in Baltimore and move into it as your main home, you must file a new Homestead Tax Credit application with the State Department of Assessments and Taxation (SDAT) within 180 days of the transfer to keep your property taxes from spiking.

What You Can Do Right Now

1. Check the Deed: Look at the current deed at the Land Records office or online. If it says "Joint Tenants with Right of Survivorship," the house may already belong to you without needing probate.
2. Get an Appraisal: You need to know the "Fair Market Value" of the house on the exact date the owner died. This sets your tax basis and determines if you owe the 10% inheritance tax.
3. Visit the Register of Wills: Call 410-752-5131 to set an appointment. You will need a certified copy of the death certificate and the original Will (if there is one) to start the process of getting the house into your name.
4. Protect the Homestead Credit: If you are moving into the house, visit the Maryland OneStop portal to apply for the Homestead Property Tax Credit so you don't lose the tax cap established by the previous owner.