Work in Maryland, Live in DC: How Your Wages Are Taxed

Reciprocity

Do Maryland and DC have a tax reciprocity agreement?

Yes. The Comptroller of Maryland's Tax Tip 56 says a resident of Washington, D.C. or Virginia who works in Maryland and does not live in Maryland for more than six months during the calendar year is exempt from Maryland state income tax withholding on wages earned there. The 2025 Maryland nonresident instructions state the same limit in days: a District resident who did not keep a place of abode in Maryland for more than six months (183 days or more) is exempt from Maryland tax on Maryland wage and salary income.

The rule covers pay for work, nothing else. Those instructions say a District resident with Maryland source income other than salaries and wages must file a Maryland return if gross income is above the filing thresholds. A rental condo in Silver Spring or a side business in Maryland still reaches the Comptroller.

Maryland extends similar treatment to Pennsylvania, Virginia and West Virginia residents, but the details differ by state. For a District resident, the only condition beyond wages is the abode test.

Returns

Which returns does a DC resident with a Maryland job file?

Usually one: DC Form D-40. The Office of Tax and Revenue (OTR) answers this case in its filing FAQ: if you lived in the District and work in Maryland or Virginia, you are required to file a DC return. Its general triggers apply as well, including a permanent residence in DC for part or all of the year.

Maryland's nonresident booklet says a nonresident is not required to file a Maryland return if they reside in the District of Columbia, Virginia or West Virginia and had only wages from Maryland. The exception is withholding taken in error, which you recover on Form 505 (see the last section).

On the D-40, report your Maryland salary like any other wage. The DC schedule OTR lists for tax years beginning after 12/31/2021 runs from 4% of taxable income up to $10,000 to 10.75% of taxable income over $1,000,000, and it is the current table on the OTR rates page. The return is due April 15.

Form MW507

How do you fill out Form MW507 as a DC resident?

Use line 4. MW507 is the certificate your employer relies on to withhold the correct Maryland income tax, and on the 2025 version line 4 reads: I claim exemption from withholding because I am domiciled in one of the following states. You check District of Columbia, certify that you do not maintain a place of abode in Maryland, and write EXEMPT on the line. The instructions say line 4 is for residents of the District of Columbia, Virginia or West Virginia who work in Maryland and do not maintain a place of abode there for 183 days or more.

The form still asks for a county. Nonresidents enter the Maryland county, or Baltimore City, where they are employed, so fill that box with your work location.

Your employer has a step too. The MW507 instructions require employers to send a copy of the certificate to the Comptroller's Compliance Division when an employee claims exemption on the basis of nonresidence, and the division will notify the employer if a change is required. If the Comptroller revokes a certificate, any new one goes to the Comptroller for approval before payroll uses it.

County tax

Does Maryland county income tax apply to a DC resident?

Not to wages covered by the exemption, and this is where the District's deal is stronger than Pennsylvania's. Pennsylvania residents use line 5 of MW507, which exempts them only from the state portion of withholding. The instructions say those employees are still liable for withholding tax at the rate in effect for the Maryland county in which they are employed, unless a separate local exemption applies.

Line 4, the District line, claims exemption from withholding without that carve-out. The 2025 nonresident booklet backs it up at filing time: qualifying District residents are exempt from Maryland tax on Maryland wage and salary income and enter all of it in the Non-Maryland Income column of Form 505 if they file one.

So a DC resident on line 4 should see no Maryland state or county withholding on the pay stub. If a county line appears, ask payroll to check which MW507 line was keyed in. County rates for Maryland residents are on our Maryland county income tax rates page.

DC withholding

Will your Maryland employer withhold DC tax?

Not necessarily. OTR says that when a DC resident works in Maryland or Virginia, the employer may not be required to withhold DC taxes. Once your MW507 stops Maryland withholding, your paycheck can show no state-level income tax at all, even though the District will tax the full salary.

The District expects you to pay as you go. OTR's rule is that you must file Form D-40ES, the DC declaration of estimated tax, if you are required to file a DC return and expect to owe $100.00 or more after subtracting withholding and credits. Underpayment interest is figured on Form D-2210; if you leave it off, OTR calculates the interest when it processes your return.

Ask payroll first whether it can withhold DC income tax for you. If it cannot, schedule D-40ES payments. The worked example below shows the DC tax at one salary level.

Worked example: $120,000 of DC taxable income, Maryland tax withheld before MW507

Taxable income is after DC deductions. Uses the DC rate schedule for tax years beginning after 12/31/2021. The $1,900 of Maryland withholding is an assumed figure for illustration.

Statutory residency

What if you keep a place to live in Maryland?

The exemption ends if you maintain a place of abode in Maryland for 183 days or more. The MW507 instructions say a District domiciliary in that position becomes a statutory resident of Maryland, must file a resident return reporting total income, and must apply to the domicile state for any tax credit available under the reciprocal provisions of the law. Tip 56 puts it simply: live in Maryland for more than six months and you file a Maryland resident return.

A weekday apartment near a Maryland office, kept all year, is one way commuters can trip this rule. On the DC side, the D-40 offers an Out of State tax credit to taxpayers domiciled in the District for individual income tax paid to other states on income derived from those states. The booklet measures it by the total liability on the other state's return, not W-2 withholding, and limits it to the rate of tax charged in the District.

Remote work

Does remote or hybrid work change the Maryland exemption?

Not for the certificate itself. Line 4 of MW507 turns on two facts: you are domiciled in the District, and you do not maintain a place of abode in Maryland. Neither counts office days against home days, so moving from five days in Rockville to two does not change the line you use.

The District side does not change either. DC's rate schedule applies to the taxable income of an individual domiciled in the District at any time during the tax year, so days at a Maryland desk and days at your DC kitchen table go on the same D-40.

Remote work matters only if it moves you. If a flexible schedule turns into living most of the year in a Maryland home, the 183 day abode test decides your status, not your commute.

Moving

What happens if you move between DC and Maryland mid-year?

DC treats you as a part-year resident if you move into or out of DC during the year with the intent to establish or abandon your domicile there. You still file the D-40, enter your period of domicile on Line 2, and prorate credits, exemptions and deductions to the time you were domiciled in DC.

Maryland's booklet says you are a part-year resident if you established or abandoned legal residence during the tax year. Instruction 28 covers movers who received taxable Maryland income both while a resident and while a nonresident; they file two Maryland returns. Wages exempt under line 4 during your DC months are a detail to raise with the Comptroller or a preparer before you choose your forms.

Update payroll the week you move. A District resident moving into Maryland no longer qualifies for line 4 and needs a new MW507 with a Maryland county of residence; a Maryland resident moving into DC can switch to line 4 from that point.

Fixing errors

How do you get back Maryland tax withheld by mistake?

File nonresident Form 505. The 2025 booklet's steps: complete the top of the form through filing status, residence information and exemptions, and check the box beside the residence information showing the tax was withheld in error. Enter your federal adjusted gross income on Line 17 in both columns 1 and 3 and on Line 24, then complete Lines 44 to 49, 51 and 53. Sign it and attach the W-2s showing the Maryland tax.

Watch the clock: the booklet says you must file within three years of the original due date to receive any refund. Tip 56 adds the other half of the fix, filing a corrected MW507 with your employer to stop the withholding. Do not report the Maryland amount as DC withholding; the D-40 booklet says income tax withheld for other states does not go in the DC tax withheld line. Our state reciprocity agreements list compares this setup with other border pairs.