If i received unemployment from dc but I live in Maryland -do i file a dc return? or a nonresident dc return?

[DanielV01]

Unless DC tax was withheld from your unemployment, no. DC does not tax a nonresident of DC.  If you did have DC tax withheld, you may file a DC nonresident request for a refund.

[Dave5550]

Is that true even though unemployment benefits are not earned income?  I thought tax reciprocity agreements only applied to earned income?

[Hal_Al]

Q. Is that true even though unemployment benefits are not earned income?

A. Yes.  The technicality is that the income (UIC unemployment income compensation) was received in MD.  This is a common situation and the rule is the same in all states; you only pay tax on out of state UIC to your home state. 

[KLEM1]

So if I lived in Maryland and received DC UI, with federal withdrawals,  I owe Maryland? 

[MaryK4]

Yes, if you were a resident of Maryland you would only have to report and pay the tax on unemployment in Maryland, even if it was DC UI.  

@KLEM1

[KLEM1]

I received my last two DC UI checks while a resident of Virginia. Will this have any impact on what I owe Maryland?

@MaryK4 

[MaryK4]

If you were a Virginia resident when you received the Unemployment, it would be allocated to Virginia. If you file a Part Year Virginia return, you would include it on as income on the Virginia return, and then not include it for Maryland (on the part-year MD502 under Subtractions).  Note: Unemployment is not taxable income in Virginia.

@KLEM1

[KLEM1]

Thank you. @MaryK4 

[burtongirls]

Is the opposite also true?  What I mean is if you're a DC resident and got MD unemployment?

[DanielV01]

@burtongirls  Since you are a DC resident, DC taxes all of your income no matter where you earned it.  If MD tax was withheld from the unemployment, you would need to file a MD return to get a refund for mistaken withholdings (as you do not pay MD tax on the unemployment).  But you are taxed in DC if they do not exclude the income as the Federal Government is.

[burtongirls]

Thanks!  I got some mixed advice earlier about this question.  We'd already filed the Federal and DC forms, but we were told we also needed to file in MD.  Then, I tried to fill out the MD form and was even more confused by the information--lots of double negatives.  I checked the DC form again, and I saw that we'd paid DC taxes for the unemployment benefits and that didn't seem to make sense to me.  That's when I found this series of posts.

I'm sure that a lot of people are confused about unemployment benefits this tax season!  I appreciate the clear answer and the understandable explanations!

[DanielV01]

@burtongirls  That might be the understatement of the year.  When tax law gets changed in March, it is not an easy adjustment.

[MarRa1]

@MaryK4 , I have a related question: Do I report unemployment income based on the payment issue date or the benefit date?

I moved from CA to DC and back to CA in 2020. My unemployment was filed in CA, and I only received unemployment payments ($$ in account) while a resident of CA. The unemployment benefit dates, however, cover a period of time when I was a resident in DC. Would this income be considered only CA income (and therefore untaxed), or would the portion that covered benefit dates while I was a DC resident be subject to DC tax?

[DanielV01]

How long were you in DC?  It's possible that even though you "moved" to DC you still are considered a nonresident of DC.

Even if that is not the case, though, DC is conforming to the Federal provision to exclude up to $10,200 of your unemployment compensation from your DC tax return.