I think you are confusing this with the regular pension exclusion. The exclusion for Social Security income is independent of the exclusion for military retirement on your Maryland tax return.
You can see this in TurboTax by examining line 11 of Form 502 where the Social Security income is excluded and line 13 where the subtraction for military retirement is shown with code U. You can see this behavior by entering a Form 1099-INT showing $100,000 of income, a Form 1099-R showing $15,000 of taxable income (the maximum military retirement exclusion), and $40,000 of Social Security income, $34,000 of which is federally taxable. Line 11 will show $34,000 being excluded and line 13 will show $15,000 being excluded, leaving only the $100,000 of interest income as the Maryland AGI. Even if the military retirement income was higher than $15,000 in this example you would get no regular pension exclusion because the excluded military pension plus the excluded Social Security income exceed the maximum allowable regular pension exclusion.
