I am a Virginia resident with a rental property in Maryland. Why is turbotax requiring me to file a MD nonresident return? My CPA has never done this.

[andymichelleh01]

The following comes from tax.virginia.gov, regarding states that have reciprocity with VA: If you only earned wages or salaries that were exempt from the other state’s tax, you won’t have to file an income tax return or pay income tax to that state.
I believe the wages would be exempt if there were any (we actually had a small loss this year though), because I'm paying the taxes in VA (my resident state)?

[DanielV01]

It depends.  You are correct that VA and MD are reciprocal states, and that wages are not taxed in the nonresident state.  However, rental income is not considered as wages, but rather as passive income.  Maryland does require a nonresident return on rental income, even for a Virginia resident, as this MD website shows:  http://taxes.marylandtaxes.com/Individual_Taxes/Individual_Tax_Types/Income_Tax/Filing_Information/D...

Having said this, you are stating that you reported a loss on your MD rental.  Thus, you do not have income to report to MD (although you may choose to file so that the rental is still reported).

When a reciprocal agreement does not cover a tax situation between two states, both of them tax you.  In this case, however, Virginia would give you a tax credit for any tax you would have to pay to MD on the income earned there.  This year it seems like you will not need to file, but this is how the law reads on this subject.

[agentkennethwang]

I live and work in VA as a real estate agent (licensed in DC and MD as well). I have several properties in MD. My rentals comes out to be a loss this year. I materially engage in all my properties since I am a real estate professional (does this have anything to do with my confusion?). To my understanding, I should be paying state taxes to VA instead of MD. I know I have to file MD state taxes but shouldn't I be taxed in VA with credit from MD if so? 'Maryland Taxable Income' as noted below does not seem correct as it seems like it's drawing the income from me being a Realtor which should be based in VA instead of just the income from the rental properties. I would rather pay state tax to VA since it's a much lower rate. I am very lost, please advise.

What I don't understand is that my 'VA Refund' at the top of TurboTax shows:
VA Tax Refund: $0 in Green

VA Tax Summary
VA Taxable Income: $86,586
Virginia Income Tax: $4,721

Total Payments: $4,721

My 'MD Tax Due' at the top of the software shows:

MD Tax Due: $6,047 in Red

Maryland Tax Summary
Maryland Taxable Income: $93,850
Total Maryland Tax: $6,047
Total Payments and Credits: $0
Tax Due: $6,047
Refund: $0 

[Carl]

Remember, with residential long term rental property it is *NOT* common to show a profit on paper at tax filing time. It is significantly more common to show a loss. This is particularly true if there is a mortgage on the property. But that does not negate one's requirement to file a tax return in the non-resident state where the rental property is located if that state taxes personal income.

When you sell that rental property, chances are high that you will show a taxable gain and that gain will most likely be taxable in the non-resident state as well as the resident state - based on the details of the reciprocal agreement between the states involved of course.

Here's some examples of what I've seen.I don't recall the specific states involved though.

If the non-resident state taxes your income at a higher percentage then your resident state, you most likely will not pay any income tax on that specific non-resident state income to your resident state.

If the non-resident state taxes your income at a lower percentage than your resident state, then your resident state tax liability will be reduced by the amount you pay to the non-resident state.

If the non-resident state does not tax personal income at all, then the income is fully taxable in the resident state.

[Rick19744]

I have attached both the Maryland Form 505 and instructions.  You should file this return as under who must file it indicates "have income from sources within Maryland".  It doesn't say profit, gain, etc. just income; which Maryland can construe as requiring a tax return.  

Where I believe you are running into trouble, is that you have not completed page 2 of form 505 correctly.  Take a look at the link and see if your return looks correct.  I doubt it does based on your facts.  You have most likely not completed columns 2 and 3 correctly.  Once these columns are completed correctly, your Maryland return should reflect no tax due.

http://www.comp.state.md.us/forms/current_forms/505.pdf

https://www.marylandtaxes.gov/forms/19_forms/Nonresident_booklet.pdf

[Hal_Al]

To my understanding, I should be paying state taxes to VA instead of MD. I know I have to file MD state taxes but shouldn't I be taxed in VA with credit from MD if so?

No. Just the opposite.  You pay tax to MD (on only your MD source income).  You also calculate tax on the MD income, on your VA return, but VA gives you a credit, or partial credit for what you pay MD. 

Your MD taxable income is NOT $93,850. It's a negative number (the net loss on your rental property).   You (apparently) have failed to allocate your income categories (wages, rent, etc) between the two states.  Look at the MD non-resident form 505.

Since you have no positive MD income for 2019, just don't file a MD return for 2019.