How is the reciprocal agreement handled in Maryland in Individual tax?

Residents of District of Columbia, Pennsylvania, Virginia, and West Virginia who work in Maryland can claim exemption from withholding for the Maryland income tax by filing form MW 507, Employee's Maryland Withholding Exemption Certificate, with their employer.

  • If you work in Maryland but reside in Delaware, you must file Form 505 (Maryland Nonresident Income Tax Return).
  • If you work in Maryland but reside in jurisdictions of Delaware, New York, and Pennsylvania that impose a local income on earnings tax, you must file Form 515.
  • If you reside in a reciprocal state and Maryland tax was withheld from your income, you must file Form 505, following Instruction 4 in the Nonresident Tax Booklet, to obtain a refund of the withholding.
    • Complete all of the information at the top of the form through the filing status, residence information and exemption areas.
    • Enter your federal adjusted gross income on line 17 in both columns 1 and 3 and line 24. Then complete line 33 (enter zero unless you claim an earned income credit on your federal return), lines 43-48, 50 and 52.
    • Sign the return and attach withholding statements (Form W-2 and/or 1099) showing the Maryland tax withheld equal to the refund you are claiming. Your return is then complete. You must file within three years of the original due date to receive any refund.

To file MD505 for refund of withholding (in error):

  1. Go to Maryland Interview Form MD5 - Part-Year and Nonresident Information and Charitable Vehicle Use.
    • In box 54 - X if Maryland tax withheld in error, enter X.  

Special instructions for residents of the following states:

  • The District of Columbia or Pennsylvania
    • If you did not maintain a place of abode in Maryland for more than six months (183 days or more) of the tax year, you are exempt from Maryland tax on your Maryland wage and salary income. Enter all wage and salary income in the non-Maryland income column of Form 505, even if you earned the income from services performed in Maryland. If you did maintain a place of abode in Maryland for more than six months (183 days or more), you are a statutory resident. Refer to Instruction 1 to see which form you need to file.
  • Virginia
    • If you did not maintain a place of abode in Maryland for any length of time (1 day or more), you are exempt from Maryland tax on your Maryland wage and salary income. Enter all wage and salary income in the non-Maryland income column of Form 505, even if you earned the income from services performed in Maryland. If you did maintain a place of abode in Maryland for 1 day, but less than 6 months (183 days) during the tax year, you will be taxed on all of the income from services performed in Maryland. If you did maintain a place of abode for more than six months (183 days or more) you are a statutory resident. Refer to instruction 1 to see which form you need to file.
  • West Virginia
    • Regardless of time spent in Maryland, you should enter all wage and salary income in the non-Maryland income column of Form 505. You are exempt from Maryland tax on all of your Maryland wage and salary income, even if you earned the income from services performed in Maryland.
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