Work in Delaware, Live in Maryland: How the Taxes Work

Reciprocity

Do Delaware and Maryland Have a Tax Reciprocity Agreement?

No. Delaware has no reciprocal wage tax agreement with any state, and Maryland is not an exception. The 2025 Maryland Nonresident Tax Forms and Instructions list the reciprocity states as the District of Columbia, Pennsylvania, Virginia, and West Virginia. Delaware is not on that list, so a Maryland resident who commutes to a Delaware job must file both a Delaware nonresident return and a Maryland resident return.

Because the two states have not entered a reciprocal agreement, the Delaware employer cannot substitute Maryland withholding at your request. Delaware law requires the employer to withhold Delaware income tax from wages earned inside Delaware, regardless of where you live. You reconcile the two states at filing time by claiming a credit on your Maryland return for the Delaware tax paid.

Which Returns

Which Tax Returns Does a Maryland Resident File?

Prepare the Delaware nonresident return first. You need the final Delaware tax figure to complete the credit on Form 502CR. On Delaware Form PIT-NON, report only Delaware source income, which is the compensation you earned for services performed inside Delaware.

On Maryland Form 502, report your income from all sources. Attach Form 502CR to claim the credit. Form 502CR instructions require you to attach a copy of the tax return filed with the other state, or the credit will not be allowed. Maryland's return follows the federal April deadline, while Delaware's is due on or before April 30, 2026 for calendar-year filers.

Credit for Other State

How Does Maryland Form 502CR Prevent Double Taxation?

Form 502CR, Part A, computes the credit for income taxes paid to another state on income also taxed by Maryland. The credit is the smaller of two amounts: the tax actually paid to Delaware on the Delaware source income, or the reduction in Maryland tax that would result from excluding that same income. In practice this caps the credit at the Maryland tax rate applied to those wages. The tax paid to the other state can include a local tax there, such as Wilmington's, because Maryland asks for your income tax liability to the other state and locality in the other state.

Form 502CR splits the credit into a State Credit and a Local Credit. Line 17 carries the state portion, and Line 18 carries the local portion (the difference between the total credit on Line 16 and the state credit on Line 17). That structure allows the Delaware tax paid to offset both the Maryland state income tax and part of the Maryland local income tax on those same wages, up to the credit ceiling.

If the Delaware tax on your commute wages is higher than the combined Maryland state and local tax on the same wages, the credit is limited to the Maryland amount. You do not get a refund of the excess Delaware tax from Maryland. If the Delaware tax is lower, the credit is limited to the Delaware amount and Maryland collects the difference.

Employer Withholding

How Should My Delaware Employer Handle Withholding?

Your Delaware employer withholds Delaware state income tax on all wages earned inside Delaware. Delaware personal income tax uses a graduated bracket schedule that starts at 2.2% above $2,000 of taxable income and reaches 6.6% for taxable income of $60,000 or over, as published on the Delaware Division of Revenue Tax Rate Changes page.

Delaware and Maryland have no reciprocity, so you cannot file a Maryland exemption certificate with your Delaware employer to move the withholding across the state line. You may make Maryland estimated payments during the year if you expect the Maryland tax on your Delaware wages, after the Form 502CR credit, to exceed the safe harbor threshold. Otherwise the Maryland credit for Delaware tax paid usually keeps the balance due small at filing time.

Check your first pay stub of the year. The state withholding line should show Delaware, not Maryland. If nothing is withheld or the wrong state appears, ask payroll to correct your setup and to update the year to date amounts.

Local County Tax

Do I Still Owe Maryland County Income Tax on Delaware Wages?

Yes. Maryland residents owe local income tax to the county (or Baltimore City) of residence on all income taxable by Maryland, including wages earned across the state line in Delaware. The local rate is set by the home county and is collected as part of the Maryland resident return, Form 502.

The Delaware employer will not withhold Maryland local tax, because Maryland local rates depend on the employee's home county, and no Delaware payroll system carries the Maryland county code. Your Form 502CR credit for Delaware tax paid can offset part of the Maryland local tax on the Delaware wages (the Local Credit on Line 18 of Form 502CR), so the local layer is not always a full extra cost. County rates vary; see our Maryland county income tax rates page for the current year figures.

If the Form 502CR credit does not cover the full local tax, Maryland collects the remainder on Form 502. Consider quarterly estimated payments to Maryland if the shortfall is large enough to trigger underpayment interest.

Worked Example: Maryland Resident Earning $80,000 in Wilmington

Single filer, all wages from a Wilmington employer, 2025 Delaware bracket schedule and 2025 Maryland Tax Rate Schedule I applied before deductions and exemptions. Wilmington tax shown at the 1.25% legal maximum. Illustrative only.

Wilmington Wage Tax

Does the Wilmington City Wage Tax Apply to Maryland Commuters?

Yes, if your Delaware work site is inside the City of Wilmington. Under Title 22, Chapter 9 of the Delaware Code, Wilmington may impose a wage tax that shall not exceed 1.25 percent of the income of nonresidents earned within the city per annum. Check the rate your employer withholds against the city's current figure. Your employer withholds this tax and remits it to Wilmington, so it does not need to be reported separately on your Maryland return.

The Wilmington wage tax is a local Delaware tax, not a Delaware state income tax. Because Form 502CR, Part A, is written for taxes paid to another state and locality, Maryland residents may claim the Wilmington tax as part of the Line 15 amount for total state and local tax paid to Delaware and Wilmington on those wages, subject to the same credit ceiling as the state portion. See our Wilmington Delaware wage tax guide for how the city rate is administered.

If your Delaware job site is outside Wilmington, such as in Newark or Dover, no local wage tax layer applies on the Delaware side. Delaware law allows this earned income tax only in municipalities with more than 50,000 residents.

Remote Work

What If I Work Remotely from Maryland for a Delaware Employer?

Delaware has its own version of the convenience rule. It lets a nonresident exclude wages only for work outside Delaware that is necessary for the employer, and its instructions say plainly that working from home does not qualify for an exclusion on Form PIT-SCW: an office in your home counts as being for your convenience, not your employer's necessity.

So if you work for a Delaware employer and choose to work some days from your Maryland home, Delaware still treats those wages as Delaware wages. Only days your employer requires you to work outside Delaware can be excluded, and you must complete Form PIT-SCW to claim them. Maryland taxes you as a resident on all of it and credits the Delaware tax through Form 502CR. Keep a written record of your workdays by location. Our convenience of the employer rule guide explains which states apply this rule.

Mid Year Move

What If I Move Between Maryland and Delaware During the Year?

If you change your permanent home between Maryland and Delaware during the year, file as a part year resident in each state. In Maryland, complete Form 502 and mark the part year resident status; the Comptroller of Maryland instructions require exemptions to be prorated on both the resident and nonresident portions. Delaware lets part-year residents choose between a resident return (PIT-RES), as if they had lived in Delaware all year, and a nonresident return (PIT-NON), and suggests preparing both and filing the one that is more advantageous.

Document your exact move date with a lease, mortgage settlement, utility activation, or driver's license change. Each state's claim to a given day of wages depends on which state you were a resident of that day. The Form 502CR credit still applies to the portion of the year you were a Maryland resident earning Delaware source wages.

Withholding Errors

What If My Employer Withheld for the Wrong State?

If a Delaware employer mistakenly withheld Maryland tax instead of Delaware tax, you will owe Delaware the full amount at filing time and Maryland will show an overpayment. Claim the wrongly withheld Maryland amount as a payment on Form 502 to receive the Maryland refund, and pay Delaware directly with Form PIT-NON. To avoid quarterly underpayment interest going forward, ask payroll to correct the state code and to update year to date figures.

If no state tax was withheld at all, a common payroll setup error, you will owe Delaware and possibly Maryland at filing time. Set up estimated payments to Delaware for future quarters using Delaware's estimated payment vouchers, and to Maryland using Form PV or the online payment system, so the shortfall does not repeat next year.