The wages earned by a spouse of a nonresident U.S. servicemember may be exempt from Maryland income tax under the Military Spouses Residency Relief Act, when the spouse of the servicemember is not a legal resident of Maryland. The income tax withholding exemption may be claimed by filing a revised Form MW507 with their employer. Beginning in 2011, you must also complete and attach Form MW507M. For more information, see Employer Withholding Tax Alert: Important Information for Spouses of U.S. Military Servicemembers and Administrative Release 1: Military Personnel and Civilian Spouses - Both Residents and Nonresidents of Maryland
As the military spouse, you remain a nonresident for purposes of Maryland taxation, and are not required to file a Maryland return, unless you received non-military income from Maryland sources. You may choose to file a joint resident return using Form 502, or your civilian spouse may file a separate resident return.
If your civilian spouse files a separate resident return then you are not required to file a Maryland return, unless you received non-military income from Maryland sources. See Instruction 8 in the resident tax booklet.
If you file a joint return, report your total federal adjusted gross income on your Maryland return. Subtract military pay and the military taxpayer's portion of any investment income (interest, dividends, etc.) from the joint federal adjusted gross income, on the line for nonresident income.
Local income tax
The military taxpayer's Maryland income is not subject to the local income tax. Enter the word "MILITARY" on line 33. Standard or itemized deductions and exemptions must be adjusted, using a ratio of Maryland adjusted gross income to federal adjusted gross income. You should use the Military Worksheet A to compute the adjustment to the standard deduction or itemized deductions as well as exemptions. Use Military Worksheet B to compute the local tax for the civilian taxpayer.
If you are not certain which filing status to use, figure your tax both ways to determine the best status for you. For more information, see Instruction 26 in the resident booklet.