Maryland taxes not picking up foreign earned income exemption

Forum|Forum|4 years ago
February 19, 2022
1 reply
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Foreign earned income exclusion was picked up by federal and no taxes are due. But Maryland does not pick it up like other years. Is this a bug?

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DaveF1006

Level 15

According to ToddL in his awesome Turbo Tax post, MD uses your adjusted gross income to calculate MD tax, any foreign earned income excluded on the federal return will be excluded from your MD return.

Go to tax tools>tools>view tax summary>preview my 1040. Compare Line 11 of the 1040 with the income being taxed on your MD return to see if is the same.

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jaferroAuthor

Level 2

Thanks for your help. My adjusted gross income (line 11) is a tiny amount after the foreign earned income exclusion. Maryland is taxing my entire income which is 95% more than line 11.

The past 4 years I've filed it's simple, Maryland shows no tax due. But this time MD is taxing me as if there was no foreign earned income. It almost seems like a bug.

ErnieS0

Level 15

Maryland will add back any excluded federal income unless that income is also exempt from Maryland taxation.

Federal tax exempt income

(c)(1) If exempted by federal law or by treaty from federal but not State tax on income, the addition under subsection (a) of this section includes salary, wages, or other compensation for personal services.

(2) If exempted by federal law or by treaty from federal but not State tax on income, the addition under subsection (a) of this section includes interest or dividends attributable to an obligation of:

(i) the United States or a foreign government; or

(ii) an authority, commission, instrumentality, possession, or territory of the United States or of a foreign government.

See § 10-204. Additions to federal adjusted gross income

You can check the income tax treaty for the country you were in. Generally, federal tax treaties do not exempt state income taxation.

If you qualified for the Foreign Earned Income Exclusion, were you a Maryland resident? You may have been either a nonresident or part-year resident for state tax purposes if you were out of the country, in which case your foreign income would not be taxed by Maryland for the period you were a Maryland nonresident.

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