Two things decide whether a job in Maryland makes you money: getting the license your work needs, and setting aside the right tax. Maryland licenses its contractors and taxes their profit, so both are worth getting right before you take work on.
Each section below points to a tool that runs your exact numbers for Maryland.
Tax in Maryland
Maryland has a graduated state income tax that runs up to 6.5% at the top, on top of your federal taxes. Graduated means the rate climbs as your profit does, so a good year costs proportionally more. You owe federal income tax and self-employment tax as well, and you make estimated payments to both Maryland and the IRS through the year.
On sales tax, Maryland follows the usual rule for the trades: your labor is not taxed, and you pay sales tax on your materials when you buy them rather than charging it to the customer. Consumer (6%); resale-cert exception for wall-to-wall carpet.
Work out what to hold back on the Tax Set-Aside Calculator, which runs the federal and self-employment numbers for Maryland.
Getting paid: liens and retainage
A mechanic's lien is the tool that actually gets a Maryland contractor paid, and in Maryland you generally have to record it within 180 days of the day your own work was finished or your materials furnished. Miss it and you lose the lien, so the dates matter.
Enforcing it has its own clock. 1 year from filing the petition. Work out your dates on the Lien Deadline tool, and if they are close, get an attorney to confirm them against the statute (Md. Real Prop. §§9-104(a), 9-105(a)).
On money held back as retainage, this is our plain-English summary for Maryland. NOT VERIFIED. No citation on this row at all: it is carried from the June 2026 spine reconciliation and has never been read against a Maryland statute here. The whole row is two bare percentages and a release that says only that it is per the contract.
- Private work: 5%.
- Public work: 5%.
- Release (unconfirmed): Per the contract.
Check the Retainage Calculator before you sign a contract that holds back more.
There is no Maryland retainage letter on this site, and the NOT VERIFIED line above is why. A letter that tells the party holding your money what to hand over only gets written over a row that has been read against the statute in full. The Document Hub carries the forms that do not turn on a state rule.
Do you need a license in Maryland?
Maryland requires a state contractor license to take building work on. The threshold that triggers it: No dollar threshold. The trigger is the type of work, acting as a contractor performing a home improvement. Working unlicensed when your job needs a license is the expensive mistake here. A 500 dollar threshold is widely repeated online and DOES NOT APPEAR IN THE STATUTE AT ALL. 8-101, 8-301 and 8-601 were read directly and contain no monetary amount. NEW-HOME CONSTRUCTION is a SEPARATE statute and a SEPARATE agency: Title 4.5, the Home Builder Registration Act, administered by the Consumer Protection Division of the Office of the Attorney General, not MHIC. The license comes from Maryland Home Improvement Commission (MHIC). Maryland accepts the NASCLA commercial exam, useful if you work across state lines.
Trade licenses for electrical, plumbing and HVAC are usually separate and often required even where a GC license is not. See what applies to your trade on the Contractor License Checker.
Building codes and permits
Maryland adopts its building codes statewide, so the rules travel with you across the state. Editions still move, so confirm yours with the building department before you price a job.
- Homes: 2021 (Maryland Building Performance Standards, effective 29 May 2023)
- Electrical: 2020; a proposed rule would move enforcement to the 2026 edition from 31 August 2026, but it is not final
- Energy: 2021, and the one family a local authority may only make stricter, never weaker
- Plumbing: adopted by floating reference to the most recent IPC rather than a named edition; a cross-reference still lists 2021 while a November 2025 amendment is reported to point at 2024
Maryland's building, residential and energy codes are a mandatory statewide minimum that a local jurisdiction may make stricter but never weaker, and where a jurisdiction has done nothing the unmodified state standard applies automatically. The energy code is singled out in the regulation as exempt from local weakening altogether. Plumbing is the awkward one: the Board adopts whatever the most recent IPC happens to be rather than a fixed year, so confirm the edition with the Board before relying on any number, including this one. Watch the electrical date if you are pulling permits this autumn.
Source: COMAR 09.12.51 and COMAR 09.12.50.02-1 under Public Safety Article §§12-503 and 12-507 to 12-510; COMAR 09.20.01 under Business Occupations and Professions Article §§12-101 and 12-205; Maryland Register, 7 August 2026 notice of proposed action on the 2026 NEC. We have not yet read this row against Maryland's own adopting authority, so confirm the edition locally before you rely on it.
Check a specific job on the permit tool.
Pay and workers' comp
The minimum wage in Maryland is $15.00 an hour. That is the floor for anyone you put on the books, and it is worth confirming against the state labor department each year because several states step their rate mid-year. Check a rate on the minimum-wage tool.
Workers' comp rates in Maryland are not published as a single figure; they turn on your trade's class code and your payroll. Get a realistic range on the Workers' Comp Estimator, then get a real quote.
If a client will not pay
If a client will not pay, you can sue for up to $5,000 in Maryland's District Court, small claims. That covers most unpaid-invoice disputes for a small outfit; a bigger claim goes to regular civil court where you will probably want an attorney. Walk through whether filing is worth it on the Small Claims checker.
The clock runs the other way too: a client generally has 3 years to sue you over the work under a written contract in Maryland, with an absolute cutoff 10 years after the job is substantially complete. Work out your exposure on the Warranty & Claim Deadline tool.
Common questions
How much state income tax will I pay in Maryland?
Maryland has a graduated rate up to 6.5% state income tax on your profit, on top of federal income tax and self-employment tax. Use the Tax Set-Aside Calculator to see what to hold back.
Do I need a contractor's license in Maryland?
Yes. Maryland requires a state contractor license. The threshold: No dollar threshold. The trigger is the type of work, acting as a contractor performing a home improvement. It is issued by Maryland Home Improvement Commission (MHIC).
What is the small claims limit in Maryland?
You can sue for up to $5,000 in Maryland's District Court, small claims. The filing fee is typically $11 to $46. Larger claims go to regular civil court.
How long do I have to file a mechanic's lien in Maryland?
Generally 180 days from the day your own work was finished or your materials furnished. Miss it and you lose the lien. Work your own dates out on the Lien Deadline tool.
What is the minimum wage in Maryland?
$15.00 an hour in Maryland, above the federal $7.25. Several states step their rate mid-year, so confirm it before you set a payroll.
What building code does Maryland use?
Maryland adopts statewide. Homes: 2021 (Maryland Building Performance Standards, effective 29 May 2023). Electrical: 2020; a proposed rule would move enforcement to the 2026 edition from 31 August 2026, but it is not final. Editions move, so confirm yours with the building department before you price a job.
The honest bit
These are the 2026 rules for Maryland as they stood when this guide was written, and they change: legislatures move thresholds, deadlines and rates every year. Treat this as general guidance to point you in the right direction, not legal, tax or financial advice. Verify anything you rely on at the source (the IRS, the Maryland tax and licensing agencies, and your local building department) or with a professional. Where Maryland does something unusual, the detail is called out above rather than glossed over.
Related: Tax Set-Aside Calculator · Mechanic's Lien Deadline · Contractor License Checker · Small Claims checker · Working in Your State
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Sources
- Maryland contractor licensing authority · Maryland contractor licensing authority. Who must hold a contractor or trade license in Maryland, and the licensing instrument (Md. Business Regulation 8-301 (requirement); 8-101(g) (definition))
- Laws - Statute Text · Mechanics lien notice, filing and enforcement deadlines in Maryland: Md. Real Prop. §§9-104(a), 9-105(a). Verified against this authority on 2026-08-09.
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