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Maryland Two Income Subtraction

October 2025

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Purpose

Maryland Two Income Subtraction

Explain

How to adjust TaxSlayer to get the correct result

Demonstrate

How to determine if TaxSlayer results are correct

Describe

Maryland Two Income Subtraction

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Maryland Two Income Subtraction (TIS)

A couple can subtract up to $1,200 on line 14 of the MD 502 if:

filing a joint return, and
both have income subject to Maryland tax

TaxSlayer will calculate the TIS automatically, but its initial calculation may be incorrect

Maryland Two Income Subtraction

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Allocation in TaxSlayer

Maryland Two Income Subtraction

YES

NO

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When is TaxSlayer correct?

Maryland Two Income Subtraction

Taxpayers have no MD tax liability (before the TIS is subtracted)

Either taxpayer or spouse has no MD taxable income

Taxpayer and spouse each have taxable MD income > $1200

MD 502

Line 34 = $0

MD 502

Line 14 = $0

MD 502

Line 14 = $1200

Some or all the numbers in the worksheet may be incorrect, but no adjustment is required

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There are 3 straightforward scenarios when considering the TIS; if any of these scenarios apply, no adjustment is needed in TaxSlayer.

[CLICK] Since the maximum amount of the TIS is $1200 per return, if each spouse has income greater than $1200 that is taxed by Maryland, the [CLICK] TIS will show up correctly as $1200 on the MD return.

[CLICK] When one or both spouses have no taxable Maryland income, the [CLICK] TIS will be zero and the amount shown on the MD 502, line14 will be correct.

[CLICK] If the taxpayers have no Maryland tax liability, it doesn’t matter if TaxSlayer puts a value on line 14 of the Maryland 502, [CLICK] because the client owes no tax and the subtraction will make no difference on the return. The calculation of the TIS does not reduce the tax liability below zero.

[CLICK] There are cases when the worksheet 13D is incorrect but the amount of the TIS is correct. You don’t need to make adjustments in TaxSlayer just to correct the worksheet.

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Maryland Worksheet 13D

Maryland Two Income Subtraction

Maryland Worksheet 502 Line 34

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When is TaxSlayer incorrect?

Maryland Two Income Subtraction

Federal income or adjustments not attributed correctly to taxpayer/spouse

One or both taxpayers have taxable MD income

$1 - $1199

AND

Maryland Additions or Subtractions not allocated correctly to taxpayer/spouse

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In some cases, the TaxSlayer calculation is incorrect, and you will need to make an adjustment on the Maryland return in TaxSlayer. [CLICK] This normally occurs when one or both spouses have taxable MD income that is less than $1200 but more than $0, and [CLICK] there are additions or subtractions on the Maryland return or [CLICK] income or adjustments on the Federal return that haven’t been allocated correctly between the taxpayer and spouse.

[CLICK] This miscalculation happens because while some income, additions, and subtractions are correctly allocated to the taxpayer or spouse during the data entry process, as I showed before on the TaxSlayer entry screen, others are not. For those that aren’t allocated specifically, TaxSlayer simply divides them in half and allocates half to each spouse, which may not be correct for the purposes of the TIS.

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Common Federal Situations

Maryland Two Income Subtraction

Federal income or adjustments not attributed correctly to taxpayer/spouse

Required allocation of childcare expenses or the state tax refund to one taxpayer (RARE)

Rents or royalties entered on Schedule E not allocated to either taxpayer or spouse

Student Loan Interest

Alimony

Self Employed Health Insurance deduction

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How can you tell - Federal?

Either Taxpayer or Spouse has Adjustments to Income shown on Form 1040, line 10 (from Schedule 1, Part II)

Maryland Two Income Subtraction

2500

Schedule 1

Form 1040

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How can you tell - Federal?

Either Taxpayer or Spouse has Income shown on Form 1040, line 8 (from Schedule 1, Part 1)

Maryland Two Income Subtraction

2500

Schedule 1

Form 1040

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How can you tell - Maryland?

Maryland Two Income Subtraction

Maryland Subtractions not allocated correctly to taxpayer/spouse

Most commonly seen:

Maryland Pension Exclusion
Taxable SS
Military Retirement Income Subtraction
Interest on U.S. Government obligations

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How can you tell - Maryland?

Maryland Two Income Subtraction

Maryland Additions not allocated correctly to taxpayer/spouse

Most commonly seen:

MD state retirement pickup, or
Taxable interest on out-of-state municipal bonds

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Steps for making TIS adjustments

Complete the entire tax return using the appropriate input screens

Mentally consider what, if any, the correct TIS should be

THEN make the appropriate adjustments to the MD taxable income;

Additions
Subtractions, and
AGI adjustments

Use the Two Income Subtraction entry screens in TaxSlayer

Maryland Two Income Subtraction

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Example TIS Calculation

Keith Richards:

$19562 from police officer disability pension (Md subtraction a.)
Drove 342 miles for Meals on Wheels ($229 MD subtraction q.)

Sarah Richards:

$23,089 in wages

Joint :

$482 interest income
$44 Savings Bond Interest (MD subtraction ab.)

Two Income Subtraction = $12

AGI = $43,177

Maryland Two Income Subtraction

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TIS Worksheet before Adjustments

TIS incorrectly calculates as $1200

AGI = $43,177

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Example TIS Calculation – Why $12?

Because…

$44 Savings Bond interest not taxed by MD (subtraction ab.)
Sarah’s MD taxable income > than $1,200 even after the Savings Bond subtraction ($23,089 wage + $241 interest)
$12 is the total of Richard’s taxable MD income:

$19,562 disability pension is not taxed by MD (subtraction a.)
$241 interest income is taxed by MD
$229 subtraction q for Meals on Wheels mileage

…so $12 is the maximum amount of the TIS.

Maryland Two Income Subtraction

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TSO DEMO

Maryland Two Income Subtraction

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TIS Worksheet after Adjustments

Maryland Two Income Subtraction

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Maryland Two Income Subtraction

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