Is My Military Income Taxable to Maryland?

Maryland Residents

If you are a Maryland resident, Maryland taxes your income from all sources, regardless of where it was earned. Active-duty military pay must generally be included on your Maryland resident return. This includes military income earned while stationed in another state or overseas. 

Military Overseas Pay Subtraction

Maryland residents may qualify for a subtraction of up to $15,000 of military pay earned while serving outside the boundaries of the United States or its possessions.

You qualify if:

• The military pay was included in your federal adjusted gross income.
• The pay was attributable to service outside the U.S. or its possessions.
• Your total military pay for the year did not exceed $30,000. If total military pay exceeds $30,000, you are not eligible for this subtraction. 

The subtraction is claimed using code"P" on Maryland Form 502SU. 

Nonresident Military Members Stationed in Maryland

If you are a legal resident of another state and are stationed in Maryland on military orders, your active-duty military pay is not taxable by Maryland. However, other income earned from Maryland sources may still be taxable to Maryland. 

To deduct the active duty military pay from the return, follow the steps below in the program:

1. State Section
2. Edit Nonresident Maryland state return
3. Subtractions From Income
4. Enter the amount of military income in the Taxable Military Income of Nonresident, included in the Federal Adjusted Gross Income box
5. Click "Continue" to save the entry

Military Retirement Income

Military retirement income may qualify for a Maryland subtraction:

• Under age 55: up to $12,500
• Age 55 or older: up to $20,000

Military retirement income includes military retirement benefits and certain military death benefits. 

Program Pathway

For qualifying overseas military pay:

1. State Section
2. Maryland Resident Return
3. Subtractions From Income
4. Other Subtractions From Income
5. Select"P - Up to $15,000 of military pay"
6. Enter the qualifying overseas military pay amount (up to $15,000)
7. Save and continue

For military retirement income:

1. State Section
2. Maryland Resident Return
3. Subtractions From Income
4. Military Retirement Income Subtraction
5. Enter the allowable amount
6. Save and continue