State Taxes

[connormbruce]

I am a graduate student and my permanent residence is in Maryland, but I  have only had income and withheld taxes in Oklahoma. Do I need to file Maryland State Taxes or only Oklahoma?

[BillM223]

Generally, you owe tax to the state where you live, and to the state(s) where you work.

Since you worked in Oklahoma, you would file a return there. And since you live in Maryland, you would file a return there. Note that you should enter Oklahoma (non-resident) return first, then your Maryland data. This allows Maryland to calculate and apply a credit for taxes paid in Oklahoma.

[connormbruce]

When you say "live" do you mean am a resident of because I don't physically live in Maryland. I live and work in Oklahoma. Due to state regulations, I cannot change my address and become a state resident of Oklahoma as I am only here for school, but I am here 12 months a year.  Last year when I went to file I was getting a large return from the state of Oklahoma and then when I added a Maryland return I owed money. I am confused on why Maryland would be taking much more than Oklahoma when I never worked in Maryland.

[BillM223]

"Domicile" is a matter of facts and circumstance. Your domicile (your permanent residence) is where you plan to return to after you are finished doing whatever you are doing out of state. It is where you have a permanent address, an landline (as if), your drivers license, your voting registration, and so on.

Your domicile remains what it is until you take positive steps to change it. In your case, this means, rent/buy property in Oklahoma, getting a landline there ( 🙂 ), registering to vote there, and telling all your friends that you have moved there.

On your last year's return, did the Maryland return show a credit for "Other state taxes paid" (i.e., Oklahoma's)?

[connormbruce]

I rent my apartment and plan to reside here after schooling. My friends and family know I have moved here. If the state would allow it I would declare residency and get a license and all of that. Since I rent and work and contribute to society in Oklahoma, does this constitute domicile and only require me to pay Oklahoma State Tax?

As for last year there was a credit for taxes paid to other states, but adding my Maryland filing still completely wiped out my return of >$1000.00. 

[AmyC]

The question becomes can you show OK residency. Where are you registered to vote? Where is your car registered? Which state is your driver's license? Is your primary bank account in OK? Are all your social and business organizations in the new state? Why do you say the state won't allow you to be a resident?

If you can answer yes to the questions above with motive to be in OK, you would be an OK resident. Please see OK resident, page 3 to see if you qualify as an OK resident. If so, no need for another state return.

[connormbruce]

Thank you and when I file a Maryland return and put in the taxes paid to Oklahoma why am I owning additional amounts? Is it due to a difference in state tax laws?

If I understand the messages above, since I only have income in the state of Oklahoma, all my taxes have gone to Oklahoma. Thus I have a return from Oklahoma. Then under my Maryland filing I would put in taxes paid to Oklahoma. When I have done this it reduces my expected return. As I interpret this Maryland is taking additional taxes than what I have already paid?

In regards to residency I cannot answer yes to all those questions and it was my university that said I cannot become a resident.

Does it matter all of my tax forms have my Oklahoma address?

[AmyC]

MD has a different tax rate. The credit is based on the lower of the tax rates. Therefore, you owe MD.

If you read page 3, I believe you may qualify as OK resident for tax purposes. Double check!

[connormbruce]

Can you explain that line one more time please? Maryland has a different tax rate. I owe the lower of the two. Why then am I owing more by adding in the Maryland filing. Wouldn't that mean I am paying the higher of the two and Maryland is higher?

[BillM223]

OK, since you tell us that you intend to stay in Oklahoma permanently, you need to take steps (for 2022) to show that you are changing your domicile. Note, the IRS, and the state of Maryland do not care that the Oklahoma university system doesn't consider you an OK resident.

Maryland will claim you as a resident until your change your domicile. This includes, renting/buying property in OK, registering to vote in OK, changing my drivers license to OK,, paying utility bills in OK, telling the post office not to deliver mail to your Maryland address any longer, and so on. There are many factors that go into this decision, and the judgment is based on the preponderance of factors.

You can claim to not be a resident of Maryland in 2021 ONLY if you can demonstrate that you did all these things in 2021. Otherwise ,get on the stick and start doing things to show your residency in 2022.

Oklahoma says this: "“Domicile” is the place established as a person’s true, fixed, and permanent home. It is the place you intend to return to whenever you are away (as on vacation abroad, business assignment, educational leave or military assignment). A domicile, once established, remains until a new one is adopted." See the Oklahoma instructions on page 3.

You owe whatever Oklahoma assesses you, less any refund from Maryland, if any. Or conversely, if you are granted a refund from OK, that is netted against your Maryland tax, and you owe the difference, whether positive or negative.

[connormbruce]

That is really helpful thank you! Is there a way to know what I individually owe to Maryland and to Oklahoma since in previous years most of my refund from Oklahoma if not all has gone to Maryland?

[BillM223]

The credit for Other State Taxes Paid in Maryland should be the amount of tax assessed in Oklahoma, that is, the amount of tax you would owe if you didn't have any Oklahoma withholding. Ditto with Maryland - what is your tax assessed.

There can be confusion because of all the credits - are you asking what you before before credits or after credits? You may not care...just look at the two state forms on the first page(form), and go down until you see Tax...

[connormbruce]

My general question I am trying to figure out is why do I owe more when I add in Maryland. What I did last year in TurboTax was do my Federal form and then do my Oklahoma form and then Maryland. What has happened the past two years is that When I finish Oklahoma i have an amount as expected return. Then when I complete the Maryland form this amount changes drastically. From the discussion above I understand Maryland has different tax rates. 

How can I figure out what additional amount Maryland is owed so for 2022 I can adjust my withholdings?

[AmyC · Accepted solution]

You can see this year's tax brackets for MD on pages 25-31. Locate your income and then plan for that amount of tax, then subtract out the OK credit. Here is the OK form with tables on pages 28-39. Check your income and withholdings through the year, so you can adjust as needed. You may want to make estimated payments to MD.

[connormbruce]

Thank you for all the information. This is what I was looking for.