To exempt your state sourced dividends from state income tax, a workaround is not required. In addition to Maryland dividends being exempt from state tax, if any dividends were sourced from a U.S. territory they are also tax exempt in Maryland:
- Puerto Rico.
- Guam.
- US Virgin Islands.
- Northern Mariana Islands.
- American Samoa.
- Midway Atoll.
- Palmyra Atoll.
- Baker Island.
To enter this in TurboTax:
- Enter your 1099-DIV in Federal > Wages & Income > Interest and Dividends > Dividends on 1099-DIV section of your return.
- Click Yes.
- Federally exempt dividends should appear in Box 11 that are from state sources.
- After one screen, it will say Tell us more about your exempt-interest dividends. Select I earned exempt-interest dividends in more than one state.
- Select Maryland from the drop-down and enter the amount of dividends from there. If you have any from the U.S. territories, you may enter those as well.
- Rather than entering all 50 states, the taxable portion can be handled by using Multiple States at the bottom of the dropdown and put in the remaining dividends. The total for all states must match the amount entered in Box 11.
If your 1099-DIV was imported, you may have to go in and edit the form to properly allocate the tax exempt dividends. You may have to delete it as @taxquestion1232 said and then re-enter it if it does not seem to be carrying through to your state return. You should see the taxable portion of the exempt dividends as an adjustment to income on your Maryland return.
@ThomasCKo
