Maryland 500DM

[aquatic101]

The 2025 Tax Year seems to be importing the 179 deduction from my PTE incorrectly into the Maryland 500DM form this year in column 1.   I tried to call but there was a one hour wait.  Anyone know how to fix this?  I can't select, Only source of adjustments is from k-1, because I have other assets from schedule E.  Either a bug or I missed something this year.

[MelindaS1]

If you mean that instead of showing the Sec. 179 amount from your K-1 Box 12 on the line for "Decoupling from PTE", it appears in the total in Column 1 "Federal as Filed", then it may be the case that your passthrough Sec. 179 expense does not exceed the Maryland limits (see the first orange circle in the below screenshot), and you are allowed to claim it in full as it appears on your federal return, without the need for a state modification. Since the PTE line only has an ending amount in Column 3, if it is allowable, then it would be figured into Line 1 Column 1, and the adjustment in Column 2 could pertain to other decoupled Maryland provisions, such as any new (from the 2025 OBBBA) 100% bonus depreciation taken on your Schedule E Form 4562 fixed assets.

This is speculative, given I don't know enough detail about your depreciable assets and methods used on Sch E for the tax year, or the amount passed through to you on Schedule K-1. As the screenshot indicates, Maryland partially decouples from Sec. 179 to a limited amount, but fully disallows "Special Depreciation Allowance" bonus. Did you take any accelerated depreciation types on your rental assets? Are there any other details you could share? 

Learn more: 2025 Maryland Form 500DM Instructions

[aquatic101]

Thank you for responding, but this is not the case.  The 179 far exceeds the state deduction of 25K.  For some reason it is adding the over large 179 amount in Column 1 instead of the PTE section below for schedule K.  Part C Line 9 is not coming into Form 502 when it is positive.  Not sure if it works when negative.    It seems to replace Line 7 last year, which worked.   Does anyone know how to fix this or is the way that you report adjustments for PTE changed this year?

[MelindaS1]

Thank you, now I see what you mean; have you fully completed the State Taxes interview screens for Maryland income and questions, including the MD 510 K-1 questions that start on the screen below? That's where you enter your state modifications, subtractions, and credits (etc.) received on the state K-1 to flow into the appropriate sections on the personal state tax return Form 502:

Select yes on the above screen if you have not already done so to add in your MD decoupling items, and then double check Form 500DM for the correct appearance of Part C Line 9. 

If you have already completed this section in full, we can begin a software investigation for issues with the current year MD 500DM. 

Note: Technical Bulletin 38 guidance for applying MD depreciation decoupling modifications in specific taxpayer situations has not yet been updated to include TY2025 changes from OBBBA or related changes to state law, which may pose a delay in troubleshooting.

See also: The instructions for Form 510 K-1 may be of help in understanding your distributive share of passthrough adjustments.

[aquatic101]

Yes.  I tried going through the step by step and entering the state K-1 instead of the Activity Worksheet, but it did not work.  I tried paying $50 for the TurboTax expert help, but the person was clueless and said that a Maryland Certified person would call me back, which they did not. 

[MelindaS1 · Accepted solution]

I apologize for all the back-and-forth this has caused, but I did find a recent link that explains why this is being treated differently: it is because of the changes to the Maryland instructions and other updated state modification forms which remove the codes for passthrough decoupling, making it flow through lines 1 - 8 instead.

As long as you are able to report the amount on line 1 of Form 500 DM, while also flowing it to Line 5 for additions on the Maryland 502 income tax return, you'll be in accordance with the latest forms instructions and taxation of federal-state difference items per the Maryland income tax code. 

If you would like to confirm this treatment before filing, you can contact the Comptroller about this issue at one or both of these email addresses: 
taxforms@marylandtaxes.gov

MDSOFTWAREDEVELOPERS@marylandtaxes.gov (e-file questions)

[aquatic101]

Thanks, the link was helpful.  If only I could get my $50 back!