Maryland Form 502 Line by Line Guide
Did you know 9 states do not require residents to pay a personal income tax? Folks that live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming, are exempt from this bill. Furthermore, 7 other states simply enforce a flat tax rate. So what’s the moral to the story? People who live in these states are able to buy more stuff because they pay less tax.
But for the rest of us, residential income tax is a necessary evil, one that takes a serious bite out of our disposable income. And while the forms are designed to collect the same data, they’re all constructed differently. What follows is a breakdown of Form 502, the Maryland Individual Income Tax Return. If you don’t live in Maryland, not to worry, we’ll be tackling the other 34 states soon enough.
The Maryland Department of Revenue has this tax form thing figured out. Form 502 is brief, to the point, and it’s not set up to confuse. It’s not overly long and it’s not overly hard. Unfortunately, it comes with a local tax that’s in addition to the state’s tax. This acts as sort of a quasi-municipality and residents are essentially taxed twice. Those that live in a beach association should be familiar with this concept.
Still, Form 502 is constructed well and has earned a 7 of 10 on our user-friendly meter. But I’m also going to call out the lawmakers, because double taxation sucks. Hey, I can say that—I used to live in Clinton, MD.
Begin by filling in your name, address, and Social Security number at the top of the form; just be sure to check off your filing status and county of residency before proceeding. In the exemption section check off all the boxes that apply and record the number of dependents you’re supporting. Now multiply the number of boxes you checked by the corresponding exemption amount, and enter your total exemption amount on Line D.
On Line 1 enter you federal adjusted gross income, you can get it from your federal return. If you have other wages, (that were not included on your federal return), include them on Line 1a. If you earned any tax exempt interest put it on Line 2. Retirement pickup income, lump sum distributions, and any other additions go on Lines 3 through 5. Add Lines 2 through 5 before adding that total to Line 1 to get your income plus any additions.
On Line 8, record your taxable refunds and any child or dependant care expenses on Line 9. If you’ve earned pension exclusions, or taxable Social Security benefits, record those amounts on Lines 10 and 11. On Line 12 record any income you received while you lived outside of Maryland; just include Form 502SU if it applies. If you have a two-income subtraction coming that amount goes on Line 14. Now add Lines 8 through 14 (the sum of which goes on Line 15), before subtracting Line 15 from Line 7 to get your Maryland adjusted gross income, which goes on Line 16.
Your standard (or itemized deduction) goes on Line 17. You’ll have to decide which one benefits you the most. Then subtract it from Line 16 and put the balance on Line 18. Record your exemption amount on Line 19 before you subtract Line 19 from Line 18 and put that balance on Line 20. So far so good?
You’ll have to refer to the tax table in the instruction booklet to see how much local tax you should have paid, the amount of which goes on Lines 21 and 22. If an earned income credit applies put that amount on Line 23. Poverty, business, or other income tax credits, belong on the next few lines. When ready, add Lines 23 through 26 to get your total credits. Then subtract Line 27 from Line 22 to get your Maryland tax after credits which go on Line 28.
Look up page 19 of the instruction booklet to find out what to multiply Line 21 by and you’ll also have to multiply the rest of your credits by that amount on the following lines. Then add Lines 30 and 31 on Line 32 before subtracting Line 32 from Line 29 to get your Local tax, which goes on Line 33.
Add Lines 28 and 33 to get your total Maryland state and local tax. If you want to donate to a few good causes, feel free to do so on Lines 35 through 37. Now you can add Lines 34 through 37 on Line 38 get your total tax plus contributions.
On Line 39 enter your Maryland withholdings; just be sure to attach your W-2. Any estimated tax payments, refundable earned income credits, and other refundable income tax credits go on the next few lines. When set, add Lines 39 through 42 to get your total payments and credits, which goes on Line 43.
If Line 38 is more than Line 43, enter the difference on Line 44, which is the amount you still owe. But if Line 38 is less than Line 43 enter that difference on Line 45 to revel the amount of your potential refund. If you want an amount of that overpayment to be applied to next year, record it on Line 46. Just be sure to include your direct deposit information, so you can get your refund in a jiffy.
If any interest or penalties apply, fill in the appropriate amounts on Line 48 before adding Lines 44 and 48, the sum of which goes on Line 51. All that’s left is to sign, date, and record your telephone number at the bottom of the form. If you had a tax pro help you, they will do the same.
As far as state forms go, this is one of the easiest. Sadly, that matters little when you live in a state that basically taxes you twice. So residents can either accept it or do I what I did and move to greener pastures. A couple of years ago, I put my money where my mouth is and I’ve got more wealth to show for it.
