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michaelbmcnulty
Level 2

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

 
8 Replies
JosephF8
Expert Alumni

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

You will need to file in this order:

 

  • MD non-resident
  • DE resident

Always file the non-resident state first.

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TomD8
Level 15

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

You must file in both states.  You'll be able to take a credit on your DE return for the taxes paid to MD, so you won't be double-taxed.

Your employer is correct to withhold MD taxes, since most, if not all, of your total state tax bill will be to MD.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
michaelbmcnulty
Level 2

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

Thanks Tom. Which state return should I complete first?

BillM223
Employee Tax Expert

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

As Joseph and Tom noted, you should do your nonresident state (Maryland) first so that the Maryland tax can be calculated, and then your state of residence (Delaware) so that the Maryland tax paid can be applied as a credit on the Delaware return.

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michaelbmcnulty
Level 2

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

Thanks, Joseph.

michaelbmcnulty
Level 2

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

Thanks Bill, and as well again to Joseph and Tom. Unsure as to why I hadn't seen their answers until yesterday.

stevef
Level 2

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

My understanding is that, if you are a resident of Delaware and you earn income in MD, you don't owe taxes to MD. If taxes from MD employment are withheld, then you must file to have them refunded. My question is whether I can ask my MD employer not to withhold taxes so that I do not have to file a MD return. 

TomD8
Level 15

I live in DE and work in MD, but my employer (State of MD) only withholds MD taxes. In which state(s) must I file tax returns, and in what order should I complete them?

@stevef 

"My understanding is that, if you are a resident of Delaware and you earn income in MD, you don't owe taxes to MD"

 

No, that's incorrect.  DE residents who work in MD are subject to MD state income tax on their MD-source income.  MD has tax reciprocity with all its bordering states EXCEPT Delaware.  As a DE resident, your income is also subject to taxation by DE.  Therefore you must file a tax return in both states.   Your employer is correct in withholding MD taxes.

 

You will be able to take a credit on your DE return for taxes paid to MD, so you won't be double-taxed.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
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