According to the Maryland Administrative Release 1, all income needs to be reported on the Maryland return regardless of where it was earned, including military pay.
If you are a resident of Maryland, all of your income is to be reported on your resident return, regardless of source or where it was earned.
Without Overseas Pay: File a resident return and include income from all sources. You must pay local taxes based on the location of your legal residence (home of record address).
With Overseas Pay: Must pay local taxes based on the location of your legal residence (home of record address). May subtract up to $15,000 in military pay earned while outside of the US boundaries or possessions. If total military pay exceeds $30,000, you cannot take this subtraction.
To make the subtraction in the program, follow the steps listed below:
- State Section
- Maryland Resident Return
- Subtractions From Income
- Other Subtractions From Income
- Select P - Up to $15,000 of military pay
- Enter amount of military pay (not more than $15,000) received while overseas (if you qualify)
- Save
If you are a nonresident of Maryland stationed in Maryland on military orders, the active duty military pay is not taxable on your return. Any other income earned while in Maryland is taxable to Maryland.
To deduct the active duty military pay from the return, follow the steps below in the program:
- State Section
- Nonresident Maryland Return
- Subtractions From Income
- Enter Taxable Military Income of Nonresident included in Federal Adjusted Gross Income
- Enter amount of military income
- Save
If military servicemember and spouse are domiciled in different states, you should file separate Maryland returns even if a joint federal return was filed. If you choose to file separate Maryland returns, special instructions must be followed. Please refer to Administrative Release 1 Part III, and the Maryland Instructions booklet for the specialized instructions. You may not be able to do this using the program.
Military Retirement
If you are under age 55, you can subtract up to $5,000 of military retirement income (including death benefits) received during the tax year. If you are 55 or older, the amount increases to $15,000.
To subtract the military retirement income from the return, follow the steps below in the program:
- State Section
- Resident Maryland Return
- Subtractions from Income
- Military Retirement Income Subtraction
- Enter amount of military income allowed
- Save