MD Additions and Subtractions incorrect/no Form 502SU or it's worksheet

Forum|Forum|3 months ago
April 13, 2026
1 reply
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(using TurboTax Deluxe Desktop on Macintosh)

HELP! Sat down to review/confirm numbers entered for our Federal and Maryland returns, especially concerning handling of US/US territories handling of interest on Federal vs Maryland returns.

The MD 502 is missing addition of tax exempt dividends (line 2) and while there is an entry on line 13 for subtractions from form 502SU, (a) I cannot validate the number, (b) the printed draft return + worksheets does not have form 502SU even though it should be attached, (c) there is no worksheet supporting this entry in either the printed return + worksheets or when reviewing the MD forms in my TurboTax file.

Exempt-Interest Dividends (aka interest) from 1040 line 2a should have been reported as a MD addition. The subtractions on form 502SU should include the portion of tax exempt interest that was earned in MD and US territories + interest earned on the Treasury note. The 1099-DIV and 1099-INT forms were imported to TurboTax from the financial institution. The Treasury note interest was correctly reported in box 3. The portion of Exempt-Interest Dividends earned in MD and various US territories was entered through the TurboTax interview process and shows in the corresponding Form 1099-DIV worksheet.

I am also unclear about TurboTax handling of Accrued Market Discount on Treasury note redemption at maturity. The AMD was subtracted as an adjustment on form 8949 (Sales and Other Disposition of Capital Assets), added in the interest section of Schedule B, then subtracted as Accrued Interest from the subtotal of all sources of interest. Is this correct? And if not correct and the AMD amount should be taxed, is that an additional subtraction to MD income?

Thanks in advance for help with these questions, Sciemom

AmyC

Level 15

Follow these steps for the addition and government interest:

Open to federal income
Edit your 1099-DIV
After the income entry, continue
Look for Uncommon Situations
Select a portion are US Government interest
Enter the dollar value
Look for Tell us more about your exempt-interest dividends
Select I earned exempt interest dividends in more than one state
select multiple states first - the bottom option
enter the amount to be added back to MD
Select MD
enter the exempt amount for your state

The US territories and exempt from federal, state and local taxes so they are not part of the Federal AGI and are not added or subtracted to MD income.

AMD:

Federal side:

Accrued interest - paid to a seller when you bought the bond between payment dates. This is subtracted because you paid the seller for interest they earned.

Accrued market discount - income you earned for buying the bond below face value, ordinary interest income.

Form 8949: You reduce the Capital Gain (Adjustment Code 'O') so you aren't double-taxed.
Schedule B: You manually add that same amount as Interest Income.