Info on the MD529 website directly contradicts this. It says that if you receive any State contribution ($250 or $500), you are not eligible for state tax deduction for MD529 contributions that you make for that year and thus should not list your MD529 contributions on your state return that year. Here's the specific verbiage:
If you receive a State contribution for any account in a given year, you are not eligible for the income subtraction on your State taxes for contributions that you made to that or any other Maryland College Investment Plan account in that year. Current Investment Plan account owners who do not receive a State contribution, however, are still eligible to receive a Maryland income subtraction of up to $2,500 per year, per beneficiary for contributions made to the account.
https://maryland529.com/home/save4college.html (Found in the FAQs)
