Military Personnel who are Nonresidents of Maryland

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.

Military income and non-Maryland income only

If you are a nonresident with military income only - or military income and other income earned outside of Maryland - then you do not have to file a Maryland income tax return.

Military income and Maryland income

If you are a nonresident with military income and other income earned in Maryland, single or with an unemployed spouse, you must file Form 505 reporting your total income and subtracting military pay; and Form 505NR, subtracting unearned and non-Maryland income, then computing the Maryland taxable net income. Deductions and exemptions must be adjusted. 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.

Military income and employed spouse under six months in Maryland

If you are a nonresident with military income, with or without Maryland income, and you have a civilian spouse employed in Maryland and residing in Maryland less than six months, you and your spouse must file Form 505, reporting total income and subtracting military pay; and Form 505NR, subtracting unearned and non-Maryland income, then computing the Maryland taxable net income. Deductions and exemptions must be adjusted. 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 by the military person or the civilian spouse.

Military income and civilian spouse with any income over six months in Maryland

If you are a nonresident with military income and your civilian spouse has any income and has resided in Maryland for more than six months, you may file a joint resident return, using Form 502, or your spouse may file a separate resident return as a statutory resident. If your spouse files a separate return, you, as a military nonresident, are not required to file a Maryland return. You should figure your tax both ways to determine which filing status is best for you.

If the spouse files a separate resident return, see Instruction 8 in the Maryland tax booklet.

When filing a separate return, your spouse may:

• Claim the standard deduction;
• Claim only the individual's federal itemized deductions from among those deductions claimed on the federal return that are attributable exclusively to that individual; and from those itemized deductions not otherwise claimed, claim a prorated amount of the itemized deductions using the Maryland income factor; OR
• Claim a prorated amount of the itemized deductions claimed on the federal return.

If you and your spouse file a joint return, report your 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. See Instruction 26 (c) through (j) in the Maryland tax booklet. The Maryland tax is then computed based on the balance of the total income. The standard deduction or itemized deductions and exemptions must be adjusted using the ratio of Maryland adjusted gross income to federal adjusted gross income. In this situation, you should use Military Worksheet A to compute the amount of allowable deductions and exemptions.

Because of residency for more than six months of the tax year, your civilian spouse becomes a statutory resident, and you, as the military spouse, remain a nonresident for purposes of Maryland taxation. You may file a separate nonresident return (Form 505) and your spouse may file a separate resident return (Form 502). See Instruction 8 in the Maryland tax booklet.

Your spouse may:

• Claim the standard deduction;
• Claim only the individual's federal itemized deductions from among those deductions claimed on the federal return that are attributable exclusively to that individual; and from those itemized deductions not otherwise claimed, claim a prorated amount of the itemized deductions using the Maryland income factor; OR
• Claim a prorated amount of the itemized deductions claimed on the federal return.

If you choose to file a joint resident return with your spouse, using Form 502:

• The military taxpayer's Maryland income is not subject to the local but is subject to the special nonresident tax. Enter the letter D in the part year/military box on the front of Form 502,
• Adjust the standard deduction or itemized deductions and exemptions, using a ratio of Maryland adjusted gross income to federal adjusted gross income;
• Adjust the local tax, using Military Worksheet B. In this situation, military worksheets A and B should be used to compute the adjustment to the standard deduction or itemized deductions and exemptions and to compute the local tax for your civilian spouse.

Military income and other income from both Maryland and non-Maryland sources, and civilian spouse with any income over six months in Maryland

Because of residency for more than six months of the tax year, your civilian spouse becomes a statutory resident, and you, as the military spouse, remain a nonresident for purposes of Maryland taxation. You may file a separate nonresident return (Form 505) and your spouse may file a separate resident return (Form 502). See Instruction 8 in the Maryland tax booklet.

The civilian spouse may:

• Claim the standard deduction;
• Claim only the individual's federal itemized deductions from among those deductions claimed on the federal return that are attributable exclusively to that individual; and from those itemized deductions not otherwise claimed, claim a prorated amount of the itemized deductions using the Maryland income factor; OR
• Claim a prorated amount of the itemized deductions claimed on the federal return.

However, if the couple chooses to file a joint resident return (Form 502):

• The military taxpayer's Maryland income is not subject to the local tax but is subject to the Special Nonresident Tax. Enter the letter D in the part year/military box on the front of Form 502.
• Standard or itemized deductions and exemptions must be adjusted.
• They must attach to the Form 502 a pro forma Form 505 and Form 505NR. See Administrative Release 1.

Both military spouses not domiciled in Maryland with Maryland income

If you and your spouse are both in the military, not domiciled in Maryland and one or both of you have Maryland income, you must file a joint nonresident return, using Form 505. You must also adjust the exemptions and the standard deduction or itemized deductions.