Audience: Individuals
If you are a legal resident of Maryland and serving in the military, you must file a resident Maryland tax return, regardless of where you are stationed. You must also report all of your taxable income from all sources, including military pay.
The wages earned by a spouse of a nonresident U.S. servicemember may be exempt from Maryland income tax under the Military Spouses Residency Relief Act, when the spouse of the servicemember is not a legal resident of Maryland. The income tax withholding exemption may be claimed by filing a revised Form MW507 with their employer. Beginning 2011, you must also complete and attach Form MW507M. For more information, see Employer Withholding Tax Alert- Important Information for Spouses of U.S. Military Servicemembers (PDF) and Administrative Release 1: Military Personnel and Civilian Spouses - Both Residents and Nonresidents of Maryland (PDF).
Military service may entitle you to special tax breaks for overseas pay and retirement income. The following links offer more information about helpful tax benefits and other unique filing situations that affect military families in Maryland.
You may be eligible for Maryland income tax credits as well as tax credits granted by another state. See Maryland Form 502CR chart and instructions. Follow the instructions provided by your state of legal residence for any possible credits allowed by that state.
If you are a legal Maryland resident and a member of the military, you must file a resident Maryland income tax return, using Form 502, and report all income from all sources, wherever earned. You do not lose your resident status if you are stationed outside of Maryland during the taxable year.
Resident military personnel who develop a state income tax liability in Maryland are also liable for the local income tax. As a resident, you are subject to the local income tax regardless of whether you were stationed in Maryland or not.
If you are a retired member of the military, you may be able to subtract up to $5,000 of your military retirement income from your federal adjusted gross income before determining your Maryland tax.
If you earned active duty income overseas outside the U.S. boundaries or possessions, you may be able to subtract up to $15,000 in overseas pay.
You or your civilian spouse must file estimated tax returns if your estimated Maryland taxable income not subject to employer withholding results in a tax liability exceeding $500. For more information, see Estimated Taxes. For more information about the filing situation for military residents in Maryland, see Instruction 29 in the Maryland resident tax booklet.
If you are a legal resident of another state but are stationed in Maryland, your military income is not subject to Maryland income tax. However, you will be taxed as a nonresident on any portion of federal adjusted gross income that was derived from any real or personal property that is located in Maryland as well as non-military income earned in Maryland, including income from Maryland lottery prizes.
If you are a nonresident with military income only, you do not have to file a Maryland income tax return.
If you are a nonresident with military income only - or military income and other income earned outside of Maryland - you do not have to file a Maryland income tax return.
If you are a nonresident with military income and other income earned in Maryland, single, or have an unemployed spouse, you must file a nonresident Maryland Form 505, reporting total income and subtracting military pay. You must also file Form 505NR, subtracting unearned and non-Maryland income, then computing the Maryland taxable net income. In addition, you must adjust your exemptions and deductions. The State of Maryland does not tax the military pay, and does not use the military pay to increase the tax liability imposed on other income earned in Maryland.
See Administrative Release 1 - Military Personnel and Civilian Spouses - Both Residents and Nonresidents of Maryland (PDF) for guidance and application of the Military Spouses Residency Relief Act, amending the Servicemembers Civil Relief Act.
If you and your spouse are in the military and not domiciled in Maryland, and one or both have Maryland income, you must file a joint nonresident return. You must also adjust your exemptions and deductions.
The wages earned by a spouse of a nonresident U.S. servicemember may be exempt from Maryland income tax under the Military Spouses Residency Relief Act, when the spouse of the servicemember is not a legal resident of Maryland. The income tax withholding exemption may be claimed by filing a revised Form MW507 with their employer. Beginning in 2011, you must also complete and attach Form MW507M. For more information, see Employer Withholding Tax Alert: Important Information for Spouses of U.S. Military Servicemembers (PDF) and Administrative Release 1: Military Personnel and Civilian Spouses (PDF) - Both Residents and Nonresidents of Maryland.
As the military spouse, you remain a nonresident for purposes of Maryland taxation, and are not required to file a Maryland return, unless you received non-military income from Maryland sources. You may choose to file a joint resident return using Form 502, or your civilian spouse may file a separate resident return.
If your civilian spouse files a separate resident return then you are not required to file a Maryland return, unless you received non-military income from Maryland sources. See Instruction 8 in the resident tax booklet.
If you file a joint return, report your total federal adjusted gross income on your Maryland return. Subtract military pay and the military taxpayer's portion of any investment income (interest, dividends, etc.) from the joint federal adjusted gross income, on the line for nonresident income.
The military taxpayer's Maryland income is not subject to the local income tax. Enter the word "MILITARY" on line 33. Standard or itemized deductions and exemptions must be adjusted, using a ratio of Maryland adjusted gross income to federal adjusted gross income. You should use the Military Worksheet A (PDF) to compute the adjustment to the standard deduction or itemized deductions as well as exemptions. Use Military Worksheet B (PDF) to compute the local tax for the civilian taxpayer.
If you are not certain which filing status to use, figure your tax both ways to determine the best status for you. For more information, see Instruction 26 in the resident booklet.
Maryland allows the same six-month extension for filing and paying personal income taxes for military and support personnel serving in a designated combat zone or qualified hazardous duty area as allowed by IRS. The extension also applies to individuals who serve in the combat zone in support of U.S. armed forces.
The extension applies to the filing of current tax returns, back year returns, estimated tax returns, amended returns or appeals to a Maryland Tax Court.
If you are hospitalized as a result of injuries sustained in a combat zone, you qualify for the extension since hospitalization is considered as service in a combat zone.
Spouses also qualify for the extension whether joint or separate returns are filed. There are two exceptions concerning hospitalization and termination of the combat zone designation. See the IRS Web site at www.irs.gov.
If you are affected by the extension, you should enter 912 in the code number box near the signature area on your Maryland return. For more information about the combat zone provision, visit the IRS Web site at www.irs.gov.
If you are a legal Maryland resident and a member of the U.S. armed forces who earned military pay while in active service outside U.S. boundaries or possessions, you may subtract up to $15,000 of that military pay from your taxable income.
If your total military pay exceeds $30,000, you do not qualify for this subtraction. You can use the Military Overseas Income Worksheet included in Instruction 13 of the Maryland tax booklet to compute the subtraction. For more information, see code p of Instruction 13.
Individuals at least 55 years of age on the last day of the taxable year may subtract up to $20,000 of military retirement income received in the taxable year from their federal adjusted gross income. Individuals under the age of 55 on the last day of the taxable year may subtract up to $12,500 of military retirement income received in the taxable year from their federal adjusted gross income. Military retirement income means retirement income, including death benefits, received as a result of military service. The military retirement income subtraction is available to a military retiree or their spouse who receives the military retirement income.
The retirement income must have been received as a result of any of the following military service:
The benefit also applies to persons separated from active duty employment with the commissioned corps of the Public Health Service, the National Oceanic and Atmospheric Administration, or the Coast and Geodetic Survey.
To claim the benefit, complete Form 502 and follow the instructions included in the resident tax booklet for line 13. Be sure to indicate code letter u on line 13.
If you are a retired military member 65 years of age or older, you may also qualify for Maryland's pension exclusion.
To change your legal residence as a member of the military, you must:
Purchases made by veterans organizations and their auxiliary units are exempt from Maryland sales tax if the purchases are made for the organization's exempt purposes.
The exemption became effective on July 1, 2006. Exemption certificates issued to qualifying veterans' organizations will expire on September 30, 2017. The new exemption certificate is a white card with green printing, bearing the organization's eight-digit exemption number. Certificates are renewed every five (5) years.
The organizations or their auxiliaries or units must possess a 501(c)(19) letter of determination from IRS as evidence of qualification for the exemption. For more information on obtaining a letter of determination from IRS, visit the IRS Web site.
To apply for an exemption certificate, print a copy of Combined Registration Application and submit the completed application with a copy of the 501(c)(19) letter of determination, articles of incorporation and bylaws. The application may also be obtained by calling Taxpayer Service at 410-260-7980, or toll-free 1-800-638-2937 from elsewhere in Maryland, Monday - Friday, 8:30 a.m. - 4:30 p.m. EST.