No, Maryland's exclusion for military retirement income (Form 502SU code U) is not offset by Social Security income. Only the regular Maryland pension exclusion limit is reduced by Social Security income.
Make sure that during the entry of the Form 1099-R in the Federal section of TurboTax that you have marked the box to indicate that the pension is from Active or reserve military retirement, otherwise TurboTax will treat the distribution as ordinary pension income.
Also, you can't claim both the retired military pension exclusion and the regular pension exclusion on the same dollars, any amount subtracted with the military pension exclusion cannot also be subtracted with the regular Maryland pension exclusion.
