Live in Nebraska, Work in Maryland: Which State Taxes Your Paycheck?
Answer
Expect withholding in Maryland and a return in both. Nebraska and Maryland hold no reciprocal agreement, so the overlap is resolved after the fact: Maryland taxes the Maryland-source wages, and your Nebraska resident return claims a credit for that tax against the Nebraska liability on the same income.
Last verified
Two states can lawfully tax the same wages: Maryland because the work happened there, Nebraska because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the Nebraska return, through the credit for taxes paid to another state.
A Nebraska resident taxed by another state on the same income claims the credit for taxes paid to other states on Form 1040N Schedule II. The credit is capped at the Nebraska 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 Nebraska.
- 2Resident return · NebraskaForm 1040N Schedule II
File a Nebraska resident return reporting all income, then claim the credit for tax paid to Maryland. The credit is capped at what Nebraska 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
| Nebraska | Maryland | |
|---|---|---|
| Taxes wages | Yes — graduated | Yes — graduated |
| Reciprocity partners | None | 4 (Form MW507) |
| Convenience rule | Yes — general rule | No |
| Nonresident return | Form 1040N with Schedule III | Form 505 with Form 505NR |
| Credit for other-state tax | Form 1040N Schedule II | Form 502CR |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | Yes |
| Revenue department | Nebraska 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 Nebraska 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: Nebraska → MarylandHome state only
- 1099 contractor: Nebraska → MarylandHome state, plus the client state if you work there
- Moved mid-year: Nebraska → MarylandTwo part-year returns
Other Nebraska pairs
Questions people actually ask
I live in Nebraska and work in Maryland. Which state takes the tax out of my paycheck?
Expect withholding in Maryland and a return in both. Nebraska and Maryland hold no reciprocal agreement, so the overlap is resolved after the fact: Maryland taxes the Maryland-source wages, and your Nebraska resident return claims a credit for that tax against the Nebraska liability on the 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 Nebraska 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. Nebraska gives residents a credit for tax paid to Maryland on the same income, claimed on Form 1040N Schedule II. The credit is capped at the Nebraska tax on that income, so if Maryland taxes it more heavily the excess is not refunded by either state.
How current is this?
The Nebraska and Maryland rules on this page were last checked against Nebraska 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.
- Nebraska Department of Revenue — individual income taxaccessed 2026-08-07
- Comptroller of Maryland — individual income taxaccessed 2026-08-07
- Maryland — Form MW507accessed 2026-08-07