Bank Gap by State
The Bank Gap in Maryland
Maryland is one of the few states where every county adds its own local income tax on top of the state rate, which makes the true tax bite on savings interest higher than the state's 5.75% top rate alone suggests.
Last reviewed August 7, 2026 · SwitchWize Research Desk
Before MD tax
$1,005/yr
on a $25,000 balance
After MD 5.75% tax
$947/yr
recoverable by switching
On a $25,000 balance, the gap is about $1,005 a year before tax. After Maryland's 5.75% top income-tax rate on the additional interest, you keep about $947. Because Treasury interest is exempt from Maryland income tax, routing that cash through a state-tax-exempt Treasury vehicle can recover most of the difference.
Estimated Bank Gap by balance
| Balance | Current earnings | Better-fit earnings | Estimated Bank Gap | After MD tax |
|---|---|---|---|---|
| $5,000 | $19 | $220 | $201 | $189 |
| $10,000 | $38 | $440 | $402 | $379 |
| $25,000 | $95 | $1,100 | $1,005 | $947 |
| $50,000 | $190 | $2,200 | $2,010 | $1,894 |
| $100,000 | $380 | $4,400 | $4,020 | $3,789 |
Estimates over 12 months at 0.38% current APY and 4.40% better-fit APY. The "After MD tax" column applies MD's 5.75% top income-tax rate to the additional interest; federal tax applies on top and is not shown. Example only — your result depends on your balance, rates, and time horizon.
Why Maryland changes the math
Maryland's top state rate on interest income is 5.75%, but every Maryland county layers on a local income tax that can add another 2 to 3.2 percentage points. Treasury interest is exempt from both the state and county components, meaningfully widening the after-tax edge from T-Bills for Maryland savers, especially near D.C.
Proximity to Washington D.C. pushes living costs in the Maryland suburbs well above the national average, sizing emergency funds — and the Bank Gap sitting on them — larger than the state's headline tax rate alone would imply.
Cost of living in Maryland is above the national average, especially near Washington D.C., which shapes how large an emergency fund needs to be and therefore how many dollars the Bank Gap quietly costs on idle cash.
Because Maryland taxes savings interest but not Treasury interest, the highest after-tax yield is not always the highest headline APY. Run your tax profile through the short-term savings tool to see whether a Treasury bill or government money market fund beats a taxable account for you.
Open the short-term savings toolFrequently asked questions
Does Maryland tax high-yield savings account interest?
Is a high-yield savings account worth it in Maryland?
Are T-Bills better than a HYSA for Maryland savers?
Your personal Bank Gap
See exactly what the gap is costing you.
Enter your balance and current rate. The Rate Gap Calculator shows the gap per year and over five years.
Calculate my Bank GapEducational information, not tax or financial advice. State tax rules are summarized at a high level and depend on your full situation. Rates are illustrative of current market conditions and should be confirmed with the provider. Confirm tax treatment with a qualified professional.