Many taxpayers are confused by the Capital Gain or Loss entry on the Maryland return and Form 502CG – Capital Gain Income. Although both relate to capital gains, they serve different purposes.
Program Entry
To access the Capital Gain or Loss entry, navigate to:
Maryland → Income → Capital Gain or Loss
What Is Capital Gain or Loss?
The Capital Gain or Loss entry is used to report gains or losses from the sale of capital assets, such as:
- Stocks
- Bonds
- Mutual funds
- Real estate held for investment
- Other investment property
In most cases, this information transfers automatically from the federal return based on Schedule D and other federal forms.
A capital gain increases taxable income, while a capital loss may reduce taxable income subject to applicable limitations.
What Is Form 502CG?
Form 502CG – Capital Gain Income is different from the standard capital gain or loss entry.
Beginning with tax year 2025, Maryland imposes an additional 2% tax on certain net capital gain income for taxpayers whose Federal Adjusted Gross Income (AGI) exceeds $350,000. Form 502CG is used to calculate this additional tax when applicable.¹
How Are They Different?
Capital Gain or Loss Entry
- Reports the actual gain or loss from the sale of assets.
- Is part of calculating income on the Maryland return.
- Applies to taxpayers regardless of income level.
- Usually transfers from the federal return.
Form 502CG – Capital Gain Income
- Is a separate calculation.
- Determines whether the taxpayer owes Maryland's additional 2% tax on net capital gain income.
- Generally applies only to taxpayers whose Federal AGI exceeds $350,000.
- Does not replace the Capital Gain or Loss entry.
Think of it this way:
The Capital Gain or Loss entry reports the income.
Form 502CG determines whether that income is subject to Maryland's additional capital gains tax.
Who May Need Form 502CG?
You may need Form 502CG if:
- Your Federal AGI exceeds $350,000, and
- You have net capital gain income subject to Maryland's additional tax.
Not every taxpayer with a capital gain will be required to complete Form 502CG.
Important Notes
- A capital gain reported on the Maryland return does not automatically mean Form 502CG applies.
- Form 502CG is generally used only for higher-income taxpayers meeting Maryland's filing requirements.
- Capital gains and losses should still be reported normally even if Form 502CG does not apply.
- Review Maryland instructions carefully if your Federal AGI exceeds $350,000.