Two State Taxes Resident or Non-Resident

[arun1rain]

Hello Experts,

I am trying to work through the step-by-step option in Turbotax but have not been able to find what needs to be done. My situation is following (and not that unusual):

1. For the first nine months of 2024 I lived in MD and worked for an employer in MD.

2. For the last three months of 2024, I moved to SC but continued to work in MD remotely for the same employer.

My understanding is that I need to file:

1. Resident tax in MD for first nine months.
2. Non-Resident tax in MD for the last three months.
3. Resident tax in SC for the last three months.

Using Turbotax deluxe, I cannot get to doing this.

I tried various other options (part-time resident for MD and SC, part-time resident for MD and Resident for SC etc.) but none gives the returns I expect.

Your insight on with what residency in MD and SC state taxes to file and how to do it in Turbotax will be much appreciated.

Thanks.

[JohnB5677]

Your resident state is SC because that is where you lived at the end of the year.

• You were a part year resident of MD.
• Use your W-2 to allocate the state percentage of income.
• The portion earned while living in SC is taxable in SC.
• If 100% is allocated to MD, you will get a credit for taxes paid to other states on the SC return.
• Process the MD return first.

[arun1rain]

Thanks for the response. Let me try again and do the following:

1. Do a part-time resident tax for MD. 100% wages were in MD.

2. Do a resident tax for SC for the last three months.

and check if (a) MD takes out the locality (county and city) tax for the first nine months. and (b) if SC credits for MD taxes for the last three months.
I will post an update.

Thanks.

[MaryK4]

If you did not work in Maryland the last three months, you would not report the income to Maryland.

Your South Carolina tax return is resident or nonresident for the entire year.  

If you moved to South Carolina during the year, you are considered a part-year resident. As a part-year resident, you may file as a full-year resident or a non-resident. 

If you file as a part-year resident, you will claim all of your income as though you were a resident for the entire year and take credit for any taxes paid in another state. As a nonresident, you will report only income earned in South Carolina. Your deductions and exemptions will be prorated by the same percentage as your South Carolina income compared to your total income. 

@arun1rain 

[arun1rain]

Hello MaryK4,

Thanks for a very helpful response. I am working my way through the TurboTax Deluxe Forms to learn how it the split of income, taxes (state and locality in MD(, tax credit get handled. I am getting closer but not there yet. The tax situation is:

1. The first 9 months lived in MD and then for the last 3 months in SC.

2. For all 12 months worked for the same employer in MD.

3. We had dividends and capitals spread throughout the year.

4. My wife as SS throughout the year.

5. She also had pension throughout the year.

As you suggested I have opted for 'part-year resident' in MD and for 'non-resident' in SC.  My gut assumption is that for SC taxes, for my non-resident filing

1. I will include all income for my last three months in SC (my 3 month wages, dividends and capital gains received during the last three months, my spouses SS and pension for the last three months) on the tax form.
2.On MD tax form, I will only include last 3 months of wages that were sourced in MD.

Does this sound correct?

I am hoping that above is correct and various numbers (e.g., locality tax in MD) and tax credits etc. will get prorated.  Right now, I am looking through the forms to figure this out.

I really appreciate your insight and help.

Thanks.

[AmyC]

Great job! 1. Yes, all SC related income goes to SC nonresident.

2. MD will include all MD income plus income received while living there.

Keep records so you can explain why you made this choice with your tax records.

Just to be sure this is your best solution, you may want to check that you aren't missing any credits by filing as a nonresident.  Enjoy SC!

Reference:  Individual Income Tax Packet for SC

[arun1rain]

Thank you all for the help. I completed the two state tax returns for MD and SC but still have a nagging feel about its being correct. To recap the tax scenario in 2024 for the first nine months we lived in MD and moved to SC. I continued to work for the same employer in MD so had wages in MD while living in SC. Here what I opted for:

1. All income (wages, dividends and capital gains, pension) for the first 9 months were allocated to MD return.
2, MD wages for the last three months was in allocated to the MD return while dividends and capital gains, pension went to SC return.

3. Tried to take tax credit for the last three months of MD wages on SC return. MD has locality tax and I am just hoping that the tax credit took care of it.
Any thoughts or comments what is may not be right?
Thank you all again.

[DianeW777]

Yes. The state returns and income allocations were correctly allocated based on your information. As far as the locality tax in Maryland, if you had it withheld, then there should be no need for concern. Keep in mind that SC will allow a credit only to the extent of the amount of tax they would have charged on the same income. 

@arun1rain