Deluxe Desktop Incorrectly Handling Federal/MD Deductions

[user17749825114]

Deluxe 2025 Desktop for WIndows with updates through 3/30/2026 is no longer allowing itemized deductions on the Federal return and standard deductions on the Maryland return..

Root Cause

An TTax update is now forcing a standard deduction on the Federal form when you want to itemize on the Federal return and take the standard deduction on the Maryland return . This is incorrect behavior. The official "Maryland 2025 State & Local Tax Forms & Instructions" document  instruction 16 says: "

ITEMIZED DEDUCTION METHOD
You may itemize your deductions only if you itemized
deductions on your federal return. See Instruction 14 for
completing Lines 17a, 17b, and 17c of Form 502. Enter the
result on Line 17. You are not required to itemize deductions
on your Maryland return simply because you itemized on your
federal return. Figure your tax each way to determine which
method is best for you"

So the software should allow itemized federal and standard Maryland deductions.

Pre-update Work Around

I had previously (early March) been able to avoid this problem by using forms mode check boxes to force itemized deductions for Federal and standard for State. This is no longer sufficient as a software update is changing the Federal to use standard deduction.

Post-update Work Around

Supposed you want to itemize Federal and take the standard deduction on the MD state return and then revisit the Federal form due to an update. You must review the Federal deductions but STOP before hitting the Continue button on the "Here Are Your 2024 and 2025 Deductions and Credits" review page.

If you do hit the final continue in the following click path

Federal -> Done With Deductions -> Let's Check Deductions and Credits -> Retirement Income Results -> Here Are Your 2024 and 2025 Deductions and Credits -> Continue 

TTax then

1) Displays  "Standard Deduction is right for you", even if your itemized deductions are higher than the standard deduction

2) Further down the page displays "Heads up, Maryland requires your state and federal deductions to match. Once you finish your state return and compare outcomes, you can come back and change your mind." This is incorrect (see Maryland filing instruction quoted in root cause above)

3) Changes your Federal from using itemized deductions to standard deductions, which in this case results in a smaller tax refund, higher estimated tax payments, ...

Real Solution

Fix bug. Skipping over the final  Continue could affect other calculations. Print and review everything before submitting.

[BillM223]

I have built a test case, in which I tried to duplicate your situation. To my surprise, I could not find a place in the interview (Step-by-Step) to require standard deduction for Maryland when then federal was itemized (I hope I got that right). I decided to go to the Maryland Info Worksheet, and in Part IV, line 4, I checked Yes over No - Yes says Maryland take the standard deduction even if less than itemized.

This gave an immediate result of reduced Maryland taxable income. 

Then I went back to the Federal -> Done With Deductions -> Let's Check Deductions and Credits -> Retirement Income Results -> Here Are Your 2024 and 2025 Deductions and Credits -> Continue  screen. When I arrived here, even before I did anything, TurboTax did an override on my Maryland choice on the Info Worksheet, and set Maryland back to itemized anyway. Hmpf.

This is not what I thought you described, but it isn't right anyway, I don't think.

And I agree that the text at the bottom of the page says "Heads up, Maryland requires your state and federal deductions to match. Once you finish your state return and compare outcomes, you can come back and change your mind." Well, that doesn't seem right. (NOTE: it lists any states on your return for which the same principle applies. On my test return, that sentence added Oklahoma and Virginia since they also were both on the test return)

I will report this.

[user17749825114]

Thanks for looking into this.  

Yes, I want to itemize Fed and take MD standard deduction. 

I would not be surprised if there are multiple problems depending on the details of the forms.I tried lots of things until I hit on the work around.

1) Like you, I tweaked the MD Part IV override. There is also a way in the Fed inf worksheet Part VI to force Fed itemization. You could maybe make test cases by generating combinations.

2) The logic that MD and Fed must match needs to be fixed to abide by the policy in the MD 502 instructions. 

3) MD now has an "itemized deduction phase out". It adds to the complexity of whether itemizing or standard deduction is better at the state level. Here is document with examples that might help create "break even" use cases :

https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/legal-publications/alerts/tax-alert-chang...