If you live in Delaware and work in Maryland, you file two state tax returns each year: a Maryland nonresident return on the wages you earned there, and a Delaware resident return on all of your income. Delaware then gives you a credit for the tax you paid Maryland on the same wages, which is what keeps the same paycheck from being fully taxed twice.
Why Two Returns Are Unavoidable
Maryland taxes income earned inside its borders regardless of where the worker lives. Delaware taxes its residents on everything they earn, everywhere. Neither state yields to the other. Maryland has reciprocity agreements with Virginia, West Virginia, Pennsylvania, and the District of Columbia that let residents of those places reduce or eliminate Maryland withholding through their employer. Delaware residents get no such option.1MDOT. 2025 MD MW507 Instructions Maryland tax comes out of every paycheck, and you settle up with Delaware when you file.2Division of Revenue – State of Delaware. Personal Income Tax FAQs
What Maryland Withholds From Your Paycheck
Maryland uses graduated state brackets, and most wage earners land in the 4.75% bracket, which covers taxable income between $3,001 and $100,000 for single filers (up to $150,000 for joint filers). Rates step up from there to 6.5% on single-filer income above $1,000,000.3Maryland Comptroller. 2026 Maryland State and Local Income Tax Withholding Information
On top of the state rate, Maryland charges nonresidents a flat 2.25% special nonresident tax that stands in for the county “piggyback” tax Maryland residents pay. Your employer withholds at a combined nonresident rate of 7.0%, which bundles the state tax and the special nonresident tax together.3Maryland Comptroller. 2026 Maryland State and Local Income Tax Withholding Information You will not owe a Maryland county tax as a Delaware resident.
The Maryland Return: Form 505 and 505NR
You report your Maryland wages on Form 505, the Maryland Nonresident Income Tax Return. That form captures only the income you earned in Maryland, not your total household income.4Comptroller of Maryland. 2025 Maryland Form 505 Nonresident Income Tax Return You also complete Form 505NR, the Nonresident Income Tax Calculation, which applies the Maryland income factor to prorate deductions and exemptions. The 505NR figure feeds back into Form 505.5Maryland Comptroller. 2025 Maryland Form 505NR Nonresident Income Tax Calculation The special nonresident tax appears on Line 17 of Form 505NR.
The final Maryland tax number is what matters for your Delaware credit. If your employer withheld more than the return shows you owe, Maryland refunds the difference. If withholding fell short, you pay the balance by April 15.6Comptroller of Maryland. iFile – Help – General Requirements
The Delaware Return: Form PIT-RES
Delaware residents file Form PIT-RES and must report all income on it, including every dollar earned in Maryland.2Division of Revenue – State of Delaware. Personal Income Tax FAQs Delaware computes tax on your full adjusted gross income first, then applies the out-of-state credit.
Delaware’s filing deadline is April 30, two weeks after Maryland’s April 15. File Maryland first, get the exact liability, then complete Delaware with accurate credit figures.7Delaware Division of Revenue. Instructions for Form PIT-RES
How the Credit Prevents Double Taxation
You claim the credit on Delaware Schedule I, “Credit for Income Taxes Paid to Another State,” and enter it on Line 27 of Form PIT-RES.2Division of Revenue – State of Delaware. Personal Income Tax FAQs It is not a dollar-for-dollar refund of what you paid Maryland. Delaware caps the credit at the lesser of two figures:
- the actual tax paid to Maryland on income Delaware also taxes; or
- the Delaware tax attributable to that same income, computed by taking the ratio of Maryland-sourced income to total AGI and multiplying by total Delaware tax.
The “lesser of” rule means you always end up paying whichever state’s effective rate is higher. If Maryland’s combined rate on your income is lower than Delaware’s, you owe Delaware the gap. If Maryland’s is higher, you absorb the higher rate because Delaware credits only up to what it would have charged.
Good news for the credit math: Delaware’s rule covers “taxes imposed by other states,” and the 2.25% special nonresident tax is imposed by the state of Maryland rather than a county, so the total Maryland liability flowing into Schedule I includes both the state income tax and the special nonresident tax.2Division of Revenue – State of Delaware. Personal Income Tax FAQs
Documentation
Attach a signed copy of your completed Maryland return to your Delaware filing. Do not use the Maryland withholding shown on your W-2 as the credit amount. The credit is based on the actual tax liability on your finalized Maryland return, which will usually differ from what was withheld.8Delaware.gov. Individual Income Tax Return Instructions
A Rough Example
Say you earn $80,000 in Maryland wages and nothing else. Maryland state tax after standard deduction and exemptions might come to roughly $3,100. The 2.25% special nonresident tax adds about $1,600. Total Maryland liability: near $4,700. Delaware’s tax on the same $80,000 would run about $3,700. Because Maryland’s tax exceeds Delaware’s on that income, the credit zeroes out your Delaware liability on those wages. You don’t get a refund for the difference. You absorb Maryland’s higher combined rate.
Days You Work From Home in Delaware
Maryland sources wage income by where you were physically present when the work was performed. Days you work in Maryland are Maryland-sourced. Days you work from your Delaware home are not.9Maryland Comptroller. COVID-19 Withholding Requirements for Teleworkers
If you have a hybrid schedule, keep a log of where you worked each day. Only the wages tied to Maryland days should be allocated to Maryland on Form 505NR. Days worked from Delaware shift income out of Maryland’s reach, including the 2.25% special nonresident tax, so a hybrid arrangement usually reduces your total state tax modestly compared with commuting every day.
Estimated Payments So You Don’t Owe a Lump Sum
Your Maryland employer withholds at that blended 7.0% nonresident rate, and no form lets a Delaware resident reduce it.1MDOT. 2025 MD MW507 Instructions Your Maryland employer is almost certainly not withholding anything for Delaware. If the credit doesn’t fully offset your Delaware liability, you can face a sizable balance in April.
Delaware requires quarterly estimated tax payments when your tax due after withholding and credits exceeds $800 for the year.10Delaware.gov. Declaration of Estimated Income Tax for Individuals Instructions For 2026, the due dates are April 30, July 31, November 2, and February 1, 2027.11Delaware Division of Revenue. State of Delaware Withholding Tax Due Dates Rental income, a side business, or investment gains widen the gap between Maryland withholding and your Delaware bill. Run the numbers early in the year rather than in April.
Deadlines and Penalties
Maryland nonresident returns are due April 15, 2026.6Comptroller of Maryland. iFile – Help – General Requirements Delaware resident returns are due April 30, 2026.7Delaware Division of Revenue. Instructions for Form PIT-RES
Delaware penalties stack. Late filing with a balance due runs 5% per month of the unpaid balance. Failure to pay on time adds 1% per month, capped at 25%, plus interest of 0.5% per month from the original due date. Missing estimated payments adds 1.5% per month on the quarterly amount you should have paid.2Division of Revenue – State of Delaware. Personal Income Tax FAQs The penalties run concurrently, so missing both filing and payment deadlines compounds the cost.