If you either established or abandoned Maryland residency during the calendar year, you must file as a part-year resident, using Form 502. You may also be required to file a return with your other state of residence.
Filing a part-year return in your first year of residency may help you avoid receiving a notice asking why you did not file with Maryland the previous year.
Instruction 26 in the Maryland resident tax booklet outlines the following steps for completing your part-year tax return correctly:
- You must file Form 502.
- Whenever the term "tax year" is used in these instructions, it means that portion of the year in which you were a resident of Maryland. If you began residence in Maryland in 2016, the last day of the "tax year" was December 31, 2016. If you ended residence in Maryland in 2016, the last day of the "tax year" was the day before you established residence in another state.
- Complete the name and address information at the top of Form 502. On Current Mailing Address Line 1, enter the street number and street name of your current address. If using a PO Box address, enter “PO Box” and the PO Box number on Current Mailing Address Line 1. On Current Mailing Address Line 2, if applicable enter the floor, suite, or apartment number for your current mailing address. If using a PO Box address, leave Current Mailing Address Line 2 blank.
- Complete the political subdivision information using Instruction 6. The political subdivision information includes the 4 DIGIT POLITICAL SUBDIVISION CODE, MARYLAND POLITICAL SUBDIVISION, PHYSICAL STREET ADDRESS LINE 1, PHYSICAL STREET ADDRESS LINE 2, CITY, ZIP CODE, and MARYLAND COUNTY fields. Use the county, city, town or taxing area of which you were a resident on the last day of your Maryland residence.
- Complete the filing status area using the same filing status that you used on your federal return. Married couples who file joint federal returns may file separate Maryland returns under certain circumstances. See Instruction 7 in the tax booklet. If you are a dependent taxpayer, use filing status 6.
- Complete the Exemptions area. You can claim the same number of exemptions that were claimed on your federal return. Additional exemptions are allowed for age and blindness for Maryland purposes which will be computed in this area.
- Complete the Part-Year/Military area on the front of Form 502. Place a "P" in the box and show the dates of residence in Maryland. Certain military taxpayers following these instructions should place an "M" in the box and enter the non-Maryland military income. If you are both part-year and military, place a "P" and "M" in the box. Married taxpayers with different tax periods filing a joint Maryland return should enter a "D" in the box, follow the remainder of this instruction and write "different tax periods" in the dates of residence area. Married taxpayers who file a joint return when one spouse is not a resident of Maryland should place a "P" in the part-year resident box and enter the name and the other state of residence of the nonresident spouse.
- Enter on line 1 the adjusted gross income from your federal return for the entire year, regardless of your length of residence.
- Complete the Additions to Income area using Instruction 12. If you had losses or adjustments to income on your federal return, write on line 5 those loss or adjustment items, which were realized or paid when you were not a resident of Maryland.
- Complete the Subtractions from Income area using Instruction 13. You may include only subtractions from income that apply to income subject to Maryland tax. Include on line 13 any income received during the part of the year when you were not a resident of Maryland.
- You must adjust your standard or itemized deductions and exemptions based on the percentage of your income subject to Maryland tax. Complete the Maryland Income Factor Worksheet to figure the percentage of Maryland income to total income. The factor cannot exceed 1 (100%) and cannot be less than zero (0%). If line 1 is 0 or less, the factor is 0. If line 1 is greater than 0 and line 2 is 0 or less, the factor is 1.
- If you itemize deductions, complete lines 17a - 17b of Form 502. Prorate the itemized deductions using this formula: Net itemized deductions X Maryland income factor = Maryland itemized deductions. Enter the prorated amount on line 17 of Form 502 and check the Itemized Deduction Method box. Another method of allocating itemized deductions may be allowed. Please send your written request along with your completed Maryland return, a copy of your federal return including Schedule A and a copy of the other state's return. If the other state does not have an income tax, then submit a schedule showing the allocation of income and itemized deductions among the states. The Maryland return must be completed in accordance with the alternative method requested. This request should be sent to the Revenue Administration Division, Taxpayer Accounting Section (Special Allocations), P.O. Box 1829, Annapolis, MD 21404-1829.
- If you are not itemizing deductions, you must use the standard deduction. The standard deduction must be prorated using the Maryland income factor. Calculate the standard deduction using the worksheet in Instruction 16 of the tax booklet. Prorate the standard deduction using the following formula: Standard deduction X Maryland income factor = Prorated standard deduction. Enter the prorated amount on line 17 of Form 502 and check the Standard Deduction Method box.
- The value of your exemptions (line 19) must be prorated using the Maryland income factor. Use this formula: Total state exemption amount X Maryland income factor = Prorated exemption amount. Enter the prorated exemption amount on line 19 of Form 502.
- You must prorate your earned income, poverty level and refundable earned income credits (if you qualify) using the Maryland income factor. See Instruction 26 in the Maryland tax booklet to see how the factor is applied.
Part-year residents with pensions
Part-year residents with pensions should complete the pension exclusion worksheet using total taxable pension and total Social Security and Railroad Retirement benefits as if you were a full-year resident. Prorate the amount on line 5 by the number of months of Maryland residence divided by 12. However, if you begin to receive your pension during the tax year you became a Maryland resident, use a proration factor of the number of months you were a resident divided by the number of months the pension was received.