If you live outside Maryland but earned money from a Maryland source, Maryland nonresident tax filing is handled on Form 505, and for 2026 you’ll pay the state’s graduated rate (2% to 6.5%) plus a flat 2.25% special nonresident tax on the income allocated to the state. Whether you actually have to file depends on how much Maryland-source income you had, what type it was, and whether you live in a state with a reciprocity agreement.
Who Has to File a Maryland Nonresident Return
Three things have to be true: you’re not a Maryland resident, you had income from Maryland sources, and your gross income meets Maryland’s minimum filing level. For tax year 2025, the most recent thresholds the Comptroller has published, the minimums are $15,750 for a single filer under 65, $31,500 for joint filers under 65, and $23,625 for head of household under 65.1Maryland Comptroller. 2025 Maryland Nonresident Tax Forms and Instructions Filers 65 and older get slightly higher thresholds. The numbers move most years, so check the current nonresident booklet for 2026 figures when they’re released.
If you clear the threshold, you file Form 505. If you also had non-Maryland income during the year, you’ll file Form 505NR alongside it to figure out what share of your total income Maryland can actually tax.2Comptroller of Maryland. 2025 Individual Income Tax Forms
The Reciprocity Exemption for DC, Pennsylvania, Virginia, and West Virginia
Maryland has reciprocal agreements with the District of Columbia, Pennsylvania, Virginia, and West Virginia. If you live in one of those jurisdictions and your only Maryland income is wages, salary, or other compensation for personal services, that income is exempt from Maryland tax and you don’t file Form 505 at all.3Comptroller of Maryland. Administrative Release No. 3 – Nonresident Credits, Reciprocal Income Tax Agreements You still owe your home state on those wages.
There’s a catch for DC, Virginia, and Pennsylvania residents. The exemption doesn’t apply if you keep a place to live in Maryland for more than six months and are physically present in the state for 183 days or more during the year. West Virginia’s agreement is broader and applies regardless of how much time you spend in Maryland.
To turn off Maryland withholding, give your employer Form MW507. DC, Virginia, and West Virginia residents who don’t maintain a Maryland abode write “EXEMPT” on Line 4; Pennsylvania residents use Line 5, and depending on their home municipality may also claim a local exemption on Line 6 or Line 7. The employer sends a copy to the Comptroller’s Compliance Division.4Maryland Comptroller. 2025 Form MW507 Employee’s Maryland Withholding Exemption Certificate
One important limit: reciprocity covers only wages and salary. A Virginia resident with rental income from a Maryland property, or business profits from Maryland operations, or a gain on selling a Maryland vacation home, still owes Maryland tax on that income and still files Form 505.
What Counts as Maryland-Source Income
Wages
Wages are Maryland-source when you physically work in Maryland, no matter where your employer is based. If you commute in three days a week and work from home in another state two days, only the three Maryland days count. Bonuses tied to Maryland work and stock options exercised while working in the state are included.
Maryland uses a physical-presence rule, not a “convenience of the employer” test. If you telework from your out-of-state home for a Maryland employer, that income is sourced to your home state. If you live outside Maryland but telework from a Maryland location, those wages are Maryland-sourced and subject to Maryland withholding.5Office of the Comptroller of Maryland. Employer Withholding Requirements for Teleworking Employees
Business Income
Profits from sole proprietorships, partnerships, and S corporations operating in Maryland are taxable to nonresident owners, even when the business itself is headquartered elsewhere. Partnerships and S corporations with Maryland-source income allocate that income to nonresident partners and shareholders, who report it on Form 505.
Rental Income and Real Estate
Rental income from Maryland properties, including short-term rentals, is fully taxable. When a nonresident sells Maryland real estate, the whole gain is Maryland-source, and depreciation recapture on a rental or business-use property is taxable too. Sales trigger a separate withholding requirement at settlement (covered below).
Other Income
Interest and dividends are generally taxed by your state of residence, not Maryland. Capital gains from selling tangible personal property located in Maryland are taxable. Distributions from trusts and estates holding Maryland assets or conducting business in the state may be taxable to nonresident beneficiaries.
Maryland Nonresident Tax Rates for 2026
For 2026, Maryland’s state income tax runs on a graduated schedule from 2% on the first $1,000 of taxable income up to 6.5% on income above $1,000,000 for single filers (or above $1,200,000 for joint filers). The 6.25% and 6.5% brackets are new for 2026.6Office of the Comptroller of Maryland. 2026 Maryland State and Local Income Tax Withholding Information
On top of the state rate, nonresidents pay a flat 2.25% special nonresident tax. This replaces the county income tax that Maryland residents owe to their local jurisdiction. Combined nonresident withholding is set at 7.0%, which reflects both the state income tax and the 2.25% special tax. Your actual liability depends on your income level, but the 2.25% applies uniformly to all nonresidents.
Allocating Income Between Maryland and Elsewhere
You only pay Maryland tax on income sourced to Maryland. How you calculate the Maryland share depends on the type of income.
Wages by Workday
Divide the days you physically worked in Maryland by your total workdays for the year, then multiply by your total wages. Weekends, holidays, vacation, and sick days are excluded unless you actually worked them. Keep a calendar or log. This is where audits focus for multi-state workers.
Business Income by Sales
Multi-state businesses use Maryland’s single-sales-factor apportionment. Your Maryland share is the percentage of total sales made to Maryland customers, not where your employees or property sit. That favors businesses with heavy Maryland payroll or property but relatively few Maryland customers.
Pass-Through Entities
Partnerships, S corporations, and LLCs taxed as partnerships allocate Maryland-source income to nonresident members, who report their share on Form 505. Maryland also offers an entity-level pass-through entity (PTE) tax election, under which the entity pays the tax on all members’ distributive shares. For individual members, the PTE rate has historically been the top marginal state rate plus 2.25%. Electing this can spare nonresident partners from filing individual Maryland returns and may create a federal deduction by turning a nondeductible state income tax into a business expense.
Withholding When a Nonresident Sells Maryland Real Estate
When a nonresident sells Maryland real property, the settlement agent withholds Maryland income tax and sends it to the Comptroller. The rate is 8.0% of the total payment for individual sellers and 8.25% for entities like corporations and partnerships.7Comptroller of Maryland. Withholding Requirements for Sales or Transfers of Real Property
“Total payment” is not the full sale price. It’s the sale price minus the mortgage being paid off and other closing expenses on the settlement statement. Even so, the withholding often exceeds the tax actually owed on the gain, and you recover the overpayment when you file Form 505.
If you expect little or no Maryland tax on the sale, apply for a Certificate of Full or Partial Exemption on Form MW506AE. It must reach the Comptroller at least 21 days before settlement.8Cornell Law Institute. COMAR 03-04-12-04 – Certificate of Full or Partial Exemption Typical grounds are the federal principal-residence exclusion under IRC Section 121, a like-kind exchange under Section 1031, or a transfer incident to divorce. You’ll need supporting documentation, and 21 days is a firm deadline.
Deductions and the Credit Nonresidents Don’t Get
Nonresidents can take deductions, but they get prorated by the ratio of Maryland income to total income. Maryland’s standard deduction is 15% of Maryland adjusted gross income, subject to minimum and maximum amounts that vary by filing status, and it’s further scaled by the Maryland income ratio. If Maryland is a small share of your total income, the deduction shrinks accordingly. Itemizing is available for mortgage interest, medical expenses, charitable contributions, and other qualifying deductions, but itemized amounts are also prorated.
One thing to know: Maryland does not give nonresidents a credit for taxes paid to other states. That credit is only for Maryland residents. If you owe tax to both Maryland and your home state on the same income, your home state is where you claim the offsetting credit.
Nonresidents can qualify for the Maryland Earned Income Tax Credit if they have Maryland-taxable income and meet the eligibility rules. It mirrors a percentage of the federal EITC and mainly helps at lower income levels.
Forms, Deadline, and How to Pay
The Maryland filing deadline matches the federal deadline, generally April 15.9Comptroller of Maryland. Personal Income Tax Filing Deadline An extension request on Form 502E buys more time to file, not more time to pay. Any tax you expect to owe is still due April 15 to avoid interest and penalties.
The forms you’ll likely need:
- Form 505, the nonresident income tax return itself.
- Form 505NR, used to compute the Maryland-to-total income ratio when you earned money in more than one state.2Comptroller of Maryland. 2025 Individual Income Tax Forms
- Form MW507, filed with your employer to adjust withholding or claim reciprocity.
- Form PV, the payment voucher for mailed payments. You can also pay electronically through the Comptroller’s iFile system.
Estimated Payments if You Aren’t Being Withheld
If you expect your Maryland tax to exceed your withholding by more than $500, you’re required to make quarterly estimated payments.10Comptroller of Maryland. Personal Tax Tip 54 – Should You Pay Estimated Tax to Maryland? This most often applies to nonresidents with rental income, business profits, or capital gains that no employer is withholding on.
To avoid underpayment interest, your four installments should total at least 90% of the current year’s liability or 110% of the prior year’s. Pay online or mail Form PV with a check. Interest on underpayments accrues quickly.
Penalties for Not Filing
Maryland charges penalties for both late filing and late payment, and interest on unpaid balances at a rate set annually under Tax-General Article Section 13-604. The rate has historically been around 10% to 11%. The current figure is published on the Comptroller’s website.
Willfully failing to file a required Maryland return is a misdemeanor. A conviction can bring a fine of up to $10,000, imprisonment for up to five years, or both.11Maryland General Assembly. Maryland Code Tax – General 13-1001 – Willful Failure to File Return Filing a false or fraudulent return carries separate civil fraud penalties on top of any criminal exposure. Nonresidents who ignore filing obligations can face tax liens, wage garnishments, and other collection actions.
If you spot an error on a return you already filed, file an amended return on Form 505X, generally within three years of the original due date including extensions.12Comptroller of Maryland. 2025 Maryland Form 505X Nonresident Amended Tax Return Instructions An amendment won’t undo penalties already assessed, but it stops interest from continuing to build and reduces your exposure if you find the problem before the Comptroller does.