On the MD return, there is not a tax credit on military retirement, but there is a deduction from your taxable income. According to the instructions for MD Form 502:
Up to $5,000 of military retirement income received by a
qualifying individual during the tax year if the taxpayer has
not yet attained the age of 65; or up to $10,000 of military
retirement income received by a qualifying individual if
the taxpayer is age 65 or over.
TurboTax will take care of including this deduction.
- Go back to the information from your 1099-R.
- After a few screens you will see Where Is This Distribution From? Mark the radio button next to Active duty military retirement. [See Screenshot #1, below.]
- Also enter the MD distribution amount, withholding, and Payer's MD State ID and click Continue.
- Continue through the rest of the screens, entering the requested information.
When you go into your MD return, you will see a screen, Here's the income that Maryland handles differently. You will see the MD Pension exclusion at the top of the screen. [Screenshot #2]
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