Author Topic: Partial-year state taxes: how to exclude nonresident income  (Read 1403 times)

the fixer

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Partial-year state taxes: how to exclude nonresident income
« on: March 07, 2014, 05:12:40 PM »
I have a question for the accounting whizzes, but it should be a common problem with a simple answer (I hope):

I was a resident of Maryland for part of the year in 2013. I'm preparing my Maryland income tax return, which requires me to enter my federal AGI then subtract off any income I received while I was not a resident of Maryland. Maybe I'm overthinking it, but here's the problem (from http://taxes.marylandtaxes.com/Individual_Taxes/Individual_Tax_Types/Income_Tax/Filing_Information/Determine_Residency_Status/If_you_are_a_Part-Year_Resident.shtml):
Quote
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.
(the exact same language is also in the Maryland individual tax instruction booklet)

My question boils down to: what does the part in bold really mean? Suppose the simple case of a salaried employee: income was earned while not a resident of Maryland, but there were also deductions that were accounted for in coming up with how that income affects AGI (401(k) contributions, health insurance premiums, etc.) Would this person put the portion of their salary in for the subtractions to income, or would they have to account for all the deductions first?

In my case I have self-employment income so it would be much more complex to apply to my situation. Would I have to adjust for all my business expenses? Do a partial re-credit of the self employment tax deduction? SEP contributions?

On the one hand it seems like the way I'm thinking of it is way too complex and there'd be more information out there about how to compute this. But on the other hand, Maryland would be letting me walk away with a really sweet deal if I get to fully count all my federal deductions even though the income that allowed me to take them was excluded.

MDM

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Re: Partial-year state taxes: how to exclude nonresident income
« Reply #1 on: March 07, 2014, 09:41:27 PM »
Here is one example:
q. Unreimbursed vehicle travel expenses for:
1. A volunteer fire company;

In other words, you may subtract that from your income if these expenses occurred while you were a Maryland resident, but you may not subtract if the expenses occurred while you live in another state.


So I think I understand that, but I don't understand the line 13/line 12 difference in the following instructions.

From the link in the OP:
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.

From Instructions for Form 502:
Line 12. NONRESIDENT INCOME. If you began or ended your residence in Maryland during the year, you may subtract the portion of your income received when you were not a resident of Maryland.

Seems you need a Maryland CPA or similar....