Why is my Texas income causing my taxes owed in Maryland to go up?

[bwdenbow2000]

I live and work here in Texas. My wife lives here in Texas also but her office is in Maryland. She only reports to the office once a quarter for 3 days so 12 days a year total. Turbo tax is suggesting that we owe a lot of money to Maryland. When I completed the state tax portion, I only reported her income earned in Maryland for the Maryland taxes. When I remove all of the income earned in Texas from our federal return, it is lowering the Maryland state taxes owed. Why is our Texas income affecting our Maryland tax return when I did not include any of the Texas income on the state return and only put the Texas income on the Federal return?

[BillM223]

Form 505 (for a non-resident) works with the federal AGI (line 3), then subtracts non-Maryland income (line 6b). Thus, line 8 (MD adjusted gross income) should be only the Maryland state income (i.e., 12 days a year your spouse works in Maryland).

Do the numbers on these lines seem right to you? 

Note that while nonresidents do not pay a local tax rate (i.e. to the county of residence), they do pay additional tax to the state (see line 17 on form 505NR Nonresident Income Tax Calculation):

Generally, nonresidents do not have a local tax rate; however, an additional state tax is withheld using the lowest local tax rate of .0225.

Page 2 of "MARYLAND WITHHOLDING TAX FACTS"

Are the numbers starting to make sense?

[bwdenbow2000]

I understand exactly what should be happening and what should be taxed. My question is relative to Turbo Tax specifically making what I believe to be a calculation error.

For the Maryland tax return on Turbo Tax, I am selecting "Nonresident (Form 505) so I assume that Turbo Tax is using form 505.  Then I select we reside in Texas because a few states have reciprocity with Maryland for tax purposes like D.C. and Virginia as many of those guys commute. Obviously Texas and Maryland do not have any type of commuter agreement.  Turbo Tax then asks what form we filed for 2023 and we filed which was for 502 because we were Maryland residents for a portion of the year. Then Turbo Tax asks what portion of your income was from Maryland sources and I put in only her income from Maryland. I assume this is so Turbo Tax can calculate and complete line 8 (MD adjusted gross income) on form 505. When I manually calculate what we should have paid vs what was paid in, we should be getting most of this income tax back to us. Turbo Tax says we owe and additional $3k. Turbo Tax allows me to see my adjusted gross income for my federal filing but it doesn't show the breakdown for the Maryland filing. I suspected that Turbo Tax was way over estimating MD taxes owed. I removed all our earnings from Texas from our federal filing on Turbo Tax just to see what happened and it lowered what it says we owe MD to $1400 which I believe to still be too high but that is irrelevant considering my Turbo Tax should not be including our Texas income on the MD form 505. I clearly listed what portion of the federal income was earned in MD yet when I removed the Texas income from the federal filing and verified that the income earned from MD sources on the state filing stayed the same the MD money owed cut in half. This seem to me to be an error with Turbo Tax as my Texas earned income should not be included on the MD state return thus not affect the money owed to MD as I add and/or remove the Texas earnings from my federal filing. How do I get someone to look at that?

[MonikaK1]

Each state has its own method of calculating the tax to be owed by nonresidents on income earned in that state. Maryland applies tax to the percentage of income earned in that state versus the taxpayer's Federal Adjusted Gross Income (California also uses this method). 

It may seem unfair that you would pay more tax on the Maryland income than would another taxpayer with a lower Federal AGI - but this is how Maryland taxes nonresidents and is not due an error in TurboTax. This is why you see a difference in the amount of Maryland tax when you remove your Texas income from your Federal return. 

Please see the screenshot below, of a blank Maryland Nonresident Tax Calculation Form 505NR, with the relevant areas highlighted.

For more information, see the Maryland Nonresident Income Tax Return Instructions. 

@bwdenbow2000