Maryland's Income Modifications section contains adjustments that may increase or decrease Maryland taxable income based on specific state tax rules. Two commonly used modifications are the Use of Vehicle for Charitable Purposes (Form 502V) and the Decoupling Modification (Form 500DM).

Program Entry

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Maryland → Income Modifications

Use of Vehicle for Charitable Purposes (Form 502V)

Form 502V provides a Maryland subtraction from income for certain unreimbursed automobile expenses incurred while performing volunteer services.

This subtraction is available to individuals who volunteer for:

• A nonprofit volunteer fire company
• A nonprofit volunteer rescue squad
• Other qualifying charitable organizations

Who May Qualify?

You may qualify if you:

• Used your personal vehicle while performing volunteer services.
• Were not reimbursed for all vehicle-related expenses.
• Performed services for a qualifying organization.

Information Required for Form 502V

Name of Qualifying Organization

Enter the name of the organization for which the volunteer services were performed.

Total Charitable Mileage

Enter the total number of miles driven while providing qualifying volunteer services during the tax year.

Examples may include:

• Travel to volunteer events
• Travel to emergency calls
• Travel related to charitable activities

Reimbursements Received

Enter any reimbursements received for travel expenses.

Only unreimbursed expenses may qualify for the subtraction.

Amount Included on Federal Schedule A

If any portion of the vehicle expenses was already claimed as a charitable contribution on Federal Schedule A, enter that amount here.

This helps prevent a taxpayer from receiving a duplicate tax benefit for the same expense.

Decoupling Modification (Form 500DM)

Form 500DM is used when Maryland requires a taxpayer to calculate income differently than how it was calculated on the federal return.

This occurs because Maryland has decoupled from certain federal tax provisions.

In other words, Maryland does not always follow every federal tax law change and may require certain items to be recalculated for Maryland purposes.

Why Does Maryland Require Form 500DM?

Federal tax laws occasionally allow deductions or accelerated tax benefits that Maryland does not recognize.

When this happens, Maryland requires taxpayers to compare:

• The federal amount reported on the federal return, and
• The amount that would have been calculated without the federal provision.

The difference may result in a Maryland addition or subtraction modification.

What Is Reported on Form 500DM?

Depreciation Deductions

Maryland may require different depreciation calculations than those used on the federal return.

The form compares:

• Federal depreciation deduction
• Maryland depreciation amount without certain federal provisions

Net Operating Loss (NOL) Deductions

Enter:

• NOL deductions reported on the federal return
• NOL deductions calculated without the decoupled federal provisions

This allows Maryland to determine the proper state adjustment.

Original Issue Discounts (OID)

Enter:

• Original Issue Discount amounts reported federally
• Original Issue Discount amounts calculated without the decoupled provisions

An Original Issue Discount generally represents interest earned on certain discounted debt instruments.

Discharge of Business Indebtedness

If debt cancellation income was treated differently under federal law, Maryland may require a separate calculation.

Enter both:

• Federal amount
• Amount calculated without the decoupled provisions

Domestic Research and Experimental Expenditures

Maryland may not conform to certain federal rules regarding the expensing of research and experimental expenditures.

The form compares:

• Federal treatment
• Maryland treatment without the decoupled provisions

Business ATI Calculation (Adjusted Taxable Income)

Certain business interest limitation calculations may require adjustment for Maryland purposes.

This section compares:

• Federal business ATI calculation
• Maryland ATI calculation without the applicable federal provision

IRC Section 168(n) Depreciation

Enter any depreciation calculated under IRC Section 168(n) and the comparable amount without the federal provision.

Maryland uses this information to determine whether a state adjustment is necessary.

Who Needs Form 500DM?

Most individual taxpayers will not need Form 500DM.

This form generally applies to taxpayers who have:

• Business interests
• Depreciation deductions
• Net operating losses
• Research expenditures
• Other items affected by federal tax law changes that Maryland does not follow

Important Notes

• Form 502V is intended for qualifying volunteer vehicle expenses that were not reimbursed.
• Form 500DM is used to reconcile differences between federal and Maryland tax law.
• Most taxpayers will not need every section of Form 500DM.
• Supporting documentation should be retained for both forms.
• Review any federal schedules, depreciation worksheets, and business records before completing Form 500DM.