Live in MD, work in PA. Local tax must be paid in PA, correct? MD return is also taking out local taxes. Do local taxes have to be paid in both states?

[Fern · Accepted solution]

If you live in MD and work in PA you do not pay PA state income taxes. The two states have a reciprocity agreement.

If you are subject to local taxes in PA, you should include the amount paid in your MD tax return.  See Maryland Form 502CR to determine if you are eligible for a tax credit for taxes paid in another state. MD instructions state "be sure to include your completed Form 502CR with your Maryland return, along with a copy of the return you filed with the other state and/or a locality in another state."

In Turbo Tax, when going through the MD state tax questions, be sure to respond to questions about taxes paid to other states.

[kennyb10427]

@Fern Thanks for the information. I live in MD and work remotely for a company based in PA. On the MD 502CR it asks for the PA taxable income. PA didn't withhold any state tax but a locality in PA withheld .75%. I can't seem to figure out how to fill out the 502CR for MD to show that I paid state tax to MD (which includes local tax) as well as the PA local tax and I don't see a place to report that local withholding on the PA form. Is there any way to recover that or show that its been double taxed?

[ErnieS0]

Maryland residents do not get credit for local tax paid to Maryland municipalities. It is part of your Maryland tax and is added to Form 502 on line 28 as Local Tax. Your local income tax is based on where you live - not where you work, or where your tax preparer is located.

Your employer probably did not withhold Maryland local tax. Talk to them. They may be able to do it so you won’t owe.

PA local tax withheld should be on your W-2 in Boxes 18-20.

You can claim a tax credit on MD Form 502CR for taxes paid to any other state and locality in the other state. Enclose a copy of your local PA Earned Income Tax return with your MD filing.

[NicoleWoods1]

Hello Ernie,

I live in Maryland and have a private practice, LLC, in PA. Why am I required to pay so much to the Comptroller of Maryland when I don't have a business in MD? My husband is employed in MD and his company takes out his MD taxes.

Thanks,

Nicole

[Hal_Al]

Q.  Why am I required to pay so much to the Comptroller of Maryland when I don't have a business in MD?

A.  Because you are a full year resident of MD.  This rule applies in all states*. 

If PA also taxes your  income, MD will give you a credit, or partial credit, for the state tax you paid to PA. 

* This is the general rule: The income is work state (WS) source income since it was earned there. Resident States (RS) tax all their resident's income, regardless of where earned. You will file a non-resident tax return for the WS and report the WS income. You will file a full year resident return for the RS, reporting all your income. The RS will give you a credit, or partial credit for any tax paid to the WS.

For state filing requirements, the WS does not, usually, go by what you earned in their state but by your total income . 

Filing Requirements: https://ttlc.intuit.com/questions/2903200-do-i-need-to-file-a-state-return

[MrBill72]

I live in Maryland put work in Pennsylvania I had local taxes taken off . Am I entitlred toget them back

[Hal_Al]

Q. I live in Maryland put work in Pennsylvania I had local taxes taken off . Am I entitled to get them back?

A.  Yes, but not exactly. This is answered above.  You cannot get a refund from the PA locality.  You claim a credit on the MD state filing.