Live in Arizona, Work in Maryland: Which State Taxes Your Paycheck?
Answer
Two returns, one credit. Maryland has the first claim on wages earned inside the state and withholds accordingly. Arizona then taxes you as a resident on everything and gives credit for what Maryland already took, capped at what Arizona would have charged on that same income.
Last verified
Without an agreement between Arizona and Maryland, the overlap is handled after the fact rather than prevented. That is why the filing order matters: the Maryland figure is an input to the Arizona return, so completing Arizona first means doing it twice.
A Arizona resident taxed by another state on the same income claims the credit for taxes paid to other states on Form 309. The credit is capped at the Arizona tax on that income, so it removes the double tax but never refunds the excess when the other state charges more.
Maryland also has a layer below the state one, and it is the layer that survives every agreement: Every Maryland county and Baltimore City levies its own income tax, collected on the state return. A reciprocity agreement exempts wages from the Maryland state tax only — it never reaches the county tax. Nonresidents who are not covered by an agreement pay a special nonresident rate in place of the county tax. Pennsylvania carries one further condition: a Pennsylvania resident exempt from the Maryland state tax remains liable for the Maryland local tax unless their own Pennsylvania jurisdiction imposes no earnings tax on Maryland residents.
What you file
- 1Nonresident return · MarylandForm 505 with Form 505NR
File the Maryland nonresident return FIRST — you need the Maryland tax figure before you can complete Arizona.
- 2Resident return · ArizonaForm 309
File a Arizona resident return reporting all income, then claim the credit for tax paid to Maryland. The credit is capped at what Arizona would have charged on that same income, so if Maryland taxes it at a higher rate the difference is not refunded.
The two states, side by side
| Arizona | Maryland | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | None | 4 (Form MW507) |
| Convenience rule | No | No |
| Nonresident return | Form 140NR | Form 505 with Form 505NR |
| Credit for other-state tax | Form 309 | Form 502CR |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | Yes |
| Revenue department | Arizona Department of Revenue | Comptroller of Maryland |
| Last verified |
The other direction
Reversing the commute does not always reverse the answer. Living in Maryland and working in Arizona gives:Both states — credit offsets the double tax.
Same two states, different situation
The withholding answer turns on how you are paid and where the work happens, not only on which two states are involved.
- Remote worker: Arizona → MarylandHome state only
- 1099 contractor: Arizona → MarylandHome state, plus the client state if you work there
- Moved mid-year: Arizona → MarylandTwo part-year returns
Other Arizona pairs
Questions people actually ask
I live in Arizona and work in Maryland. Which state takes the tax out of my paycheck?
Two returns, one credit. Maryland has the first claim on wages earned inside the state and withholds accordingly. Arizona then taxes you as a resident on everything and gives credit for what Maryland already took, capped at what Arizona would have charged on that same income.
Which state should my employer be withholding for?
Maryland. The wages are sourced to Maryland, so Maryland withholding is correct and there is no Arizona withholding to set up.
Will I end up paying tax twice on the same income?
Not twice over, but you will pay the higher of the two rates. Arizona gives residents a credit for tax paid to Maryland on the same income, claimed on Form 309. The credit is capped at the Arizona tax on that income, so if Maryland taxes it more heavily the excess is not refunded by either state.
How current is this?
The Arizona and Maryland rules on this page were last checked against Arizona Department of Revenue and Comptroller of Maryland on 2026-08-07. We re-check the full grid every December after state legislative sessions close, and re-check the convenience-of-the-employer states quarterly because that is where the rules move fastest.
Sources
Every fact above comes from the revenue department that publishes the rule. We do not cite secondary summaries, and we do not restate a figure we could not find at source.
- Arizona Department of Revenue — individual income taxaccessed 2026-08-07
- Comptroller of Maryland — individual income taxaccessed 2026-08-07
- Maryland — Form MW507accessed 2026-08-07