MD resident, working in DC

[seh2]

I'm helping my daughter with her taxes. She is a MD resident, owns a house in Baltimore, has a MD drivers license, and votes in MD, but she worked in DC all of 2024, sharing a DC apartment with her boyfriend (more than 183 days). Her W2 shows taxes paid to DC and Maryland. It looks like she has to file with both DC and MD, with DC saying she is a 'statutory resident' - but how does that work with her MD residency status? I see that there is reciprocity, but I don't understand how to file for it.

[AmyC · Accepted solution]

You have special circumstances. DC is the source of the wages and gets to tax them. MD taxes bank interest and other stuff and will give a credit for the income earned in DC.

North Eastern States Tax Officials Association Cooperative Agreement (NESTOA Agreement) includes several states where taxpayers can be residents of multiple states, including the District of Columbia Maryland. This agreement overrides the reciprocal agreement which is for living one place and working in the other.

Your daughter has a house, votes, etc in MD, that is her domicile. She is a statutory resident of DC.

The NESTOA Agreement provides that in a dual residency situation, the state to which earned income is sourced gets to tax the income. For non-sourced income, such as income from intangible assets, the state of domicile gets to tax the income.

For purposes of applying the resident credit in dual residency situations, the state of domicile must give a resident credit for earned income sourced to the state of statutory residence. For non-sourced income, the state of statutory residence must give the resident credit.

[user17747633849]

This is very good to know. Thank you.

I have a situation where I am NY domiciled and also statutory resident of MD. All my W2 income is MD-sourced. It appears NY will give me credit for income tax on earned wages in MD, but which state will give me credit for income tax on interest/dividends/cap gains (all non W2 income)?

[RogerD1]

Since you consider yourself a statutory resident of Maryland (you lived there 183 days or more during the year), you will file a Maryland resident tax return.  Because you are a considered a Maryland resident, you will be taxed on all your income.  You will want to work on your Maryland return and finalize it before starting your New York return.

Since your domicile is in New York, you are also considered a resident there as well.  New York will get to tax all your income - wages and non-wage income - but New York will also give a tax credit for the income that was taxed in Maryland.  This is why it's important to work on and finalize your Maryland return first because information from that return will be used to determine the New York credit for taxes paid to Maryland.

[Edited 4/7/2026, 7:31 AM PDT, @user17747633849 ]

[user17747633849]

Thanks @RogerD1 . I am not sure how to allocate MD only income on MD resident form 502?

As a default, as soon as I select resident return, turbo tax allocates all my federal income to MD. There does not appear to be any place where I can go in and allocate that amount. 

MD and non-MD allocation is possible in form 505, which is a MD non-resident return, which I am not sure if I can file if they are deeming me as statutory resident (183+ days).

Can you please tell me how to do the income allocation in form 502 or how do I justify using form 505?

thanks again.

[RogerD1]

@user17747633849 I amended my previous guidance to you.  Since you are a statutory resident of Maryland, you will be required to file Form 502 and all your income will be taxed by Maryland.

On the plus side, you will get a tax credit from the state of New York for the income that was taxed by Maryland, so that the income won't be double taxed.

Finalize your Maryland return.  To complete your New York return, you will need information from your Maryland return.  If you are using the Desktop TurboTax, you can see your Maryland return by clicking on Forms on the blue banner at the right.  To view a summary of your Maryland return in TurboTax online, follow these steps:

1. Click Tax Tools then Tools right below that.
2. From the Tools center pop-up, click View Tax Summary
3. Click MD Tax Summary on the left side menu

You will need the following from the Maryland return:

• Total tax liability (online) or Form 502 line 40 (desktop)
• Withholding, payments, credits (online) or Form 502 line 41 (desktop)
• Balance due (online) or Form 502 line 47 (desktop) - OR - Refund to you (online) or Form 502 line 48 (desktop)

With this information, as your progress through your New York return, you will get to a screen Take a look at New York credits and taxes. 

1. Scroll down to Credit for Taxes Paid and click Start or Revisit for Taxes Paid to Another State
2. Click Continue, then enter the Other State and local information from your Maryland return, then click Continue
3. All you income was taxed by Maryland, so enter the New York total in the column Portion Taxed by other State, then Continue
4. The Other State Tax will be the total tax liability
5. The Enter Other State Information will be the withholdings and either the Refund or Balance due

This will get the credit for taxes paid to Maryland to appear on your New York return.

[user17747633849]

@RogerD1 thank you for the detailed explanation.