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Level 1

part-year residency income after leavng military

I was in the military in 2019 and separated midway through the year (when I was serving my home of record was a state without income tax).  After separating I worked and lived in Maryland.  In filing my MD state return as a part-time resident for 2019, one section allows you to subtract your income received during the time of nonresidence in trying to figure out your MD taxable income.

 

Question: My income from my military W-2 logically goes into this box, however what about dividends and interest that were earned for 2019?  Do I enter include these numbers in their entirety, prorate them based on the time I was in the military (and a non-MD resident) for 2019, or not list them at all?

 

Confused what to do here as these items were earned thoughout the year and I haven’t been able to find any guidance on this on the state website.  Thanks!

8 Replies
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Level 15

part-year residency income after leavng military

For the other  numbers, you need to divide them up according  to when they were actually distributed to you.  Thus, only the Interest and dividends (and capital gains...if any) hat you received after separation from the military should be entered as MD income.   

 

IF you held Mutual funds that issued year-end distributions, then those entire amounts are MD income....but for the rest, you need good monthly statements.

 

  Bank/savings/checking interest is usually pretty pitiful, so only enter interest from a bank account if it was 50cents or greater for the last half of the year.  (49 cents , or lower, would round to zero, and  may result in form errors)

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I don't have the MD tax forms myself, adn I can't see exactly how the MD software interview proceeds.  So the interest/dividends/cap gains might be as separate entries...you can/should go thru the entire interview multiple times anyhow...so run thru it multiple times so you see exactly where and how to enter each of the actual amounts.

 

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Level 1

part-year residency income after leavng military

Thanks so much for this helpful information.  If you don't mind, I had one more question I could really use your expertise on (had posted it to the community as well but haven't gotten any replies):

 

For 2019, I paid real estate taxes for a home owned in VA, however was in the military so my state of legal residence was different (it was a state without any state income tax; I also had no income in VA so do not need to file a VA state return).  I separated mid-year then became a resident of MD where I am filing state taxes now. 

 

In doing my MD state taxes now, there is a section in the itemized deductions worksheet that accounts for state and local real estate taxes paid (it says to reference line 5b on federal Schedule A) in determining deductions, and Turbotax automatically put in the amount of my VA real estate taxes after I had finished my federal taxes.

 

 

Question: Even if I paid real estate taxes in VA, can this amount still be accounted for/deducted in my MD state taxes itemized deductions?  

 

 

Thank you again, much appreciated!

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Level 15

part-year residency income after leavng military

@S1    OK...Again pointing out that I do not have MD tax forms,a and I'm not fully cognizant of how MD part-year proceeds....here's my reading of the MD forms.

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Nope......messed that up, and I have to remove my evaluation as being off base.

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@dmertz   You have & know MD forms (i think)   do I have this right?

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Level 15

part-year residency income after leavng military

@S1   I changed what I wrote as the followup about VA property taxes on MD part-year forms......have prompted another person who I think  knows MD taxes better.

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Level 15

part-year residency income after leavng military

This is the first time I've looked at MD regarding real estate taxes since 2017 when I used to itemize.  Real estate taxes are not added back when determining MD itemized deductions.  They are taken into account to determine how much state and local income taxes to subtract from federal itemized deductions so that federal itemized deductions are reduced only by the amount of state and local income taxes that brought the total federally deductible state and local taxes up to the $10,000 limit.

 

If TurboTax is populating the State and Local Taxes Worksheet for MD Form 502, apparently you are itemizing.  See Instruction 26(l) (lower case L) in MD's Resident Booklet to determine how determine your MD part-year itemized deductions.  By default the full-year amount is prorated by the MARYLAND INCOME FACTOR and is what I would expect TurboTax to use, so I don't think you would have to do anything special with regard to the real estate taxes.  Alternative methods of allocating deductions to MD are are permitted upon written request to MD's Revenue Administration Division, but is probably outside the scope of TurboTax's calculations without using an override.

 

MD's Resident Booklet:  https://marylandtaxes.gov/forms/19_forms/resident_booklet.pdf

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Level 1

part-year residency income after leavng military

Thank you @SteamTrain and @dmertz  - yes I am itemizing.  I've input my Virginia real estate taxes into the Maryland State and Income Taxes Worksheet (actually it was input automatically by Turbotax on lower case b in the worksheet, as it took it from my federal Schedule A line 5b).  I've also tried removing the Virginia real estate taxes manually and it does make a difference on the Deduction amount (line 17).   Of note I have no Maryland real estate taxes from 2019 to report.  Turbotax also did automatically calculate the Maryland Income Factor.

 

So the question is, is it ok to leave the Virginia real estate taxes in the Maryland State and Income Taxes Worksheet?  I just wasn't sure if this was ok since it is from a different state, but it seems that Turbotax is saying it is? 

 

Thanks again

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Level 15

part-year residency income after leavng military

I can't find any reason that real estate taxes paid to Virginia would need to be excluded from your Maryland itemized deductions.

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Level 1

part-year residency income after leavng military

Thanks