Live in North Carolina, Work in Maryland: Which State Taxes Your Paycheck?
Answer
Maryland withholds and North Carolina credits. Without an agreement between them, both states are entitled to tax income earned in Maryland by a North Carolina resident. The mechanism that stops you paying twice is the credit on the North Carolina resident return, which is why the Maryland return has to be completed first.
Last verified
Two states can lawfully tax the same wages: Maryland because the work happened there, North Carolina because you live there. Nothing prevents the overlap in advance — it is unwound afterwards, on the North Carolina return, through the credit for taxes paid to another state.
A North Carolina resident taxed by another state on the same income claims the credit for taxes paid to other states on Form D-400TC. The credit is capped at the North Carolina 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 North Carolina.
- 2Resident return · North CarolinaForm D-400TC
File a North Carolina resident return reporting all income, then claim the credit for tax paid to Maryland. The credit is capped at what North Carolina 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
| North Carolina | Maryland | |
|---|---|---|
| Taxes wages | Yes — flat | Yes — graduated |
| Reciprocity partners | None | 4 (Form MW507) |
| Convenience rule | No | No |
| Nonresident return | Form D-400 with Schedule PN | Form 505 with Form 505NR |
| Credit for other-state tax | Form D-400TC | Form 502CR |
| Nonresident safe harbour | None published | None published |
| Local income tax | No | Yes |
| Revenue department | North Carolina 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 North Carolina 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: North Carolina → MarylandHome state only
- 1099 contractor: North Carolina → MarylandHome state, plus the client state if you work there
- Moved mid-year: North Carolina → MarylandTwo part-year returns
Other North Carolina pairs
Questions people actually ask
I live in North Carolina and work in Maryland. Which state takes the tax out of my paycheck?
Maryland withholds and North Carolina credits. Without an agreement between them, both states are entitled to tax income earned in Maryland by a North Carolina resident. The mechanism that stops you paying twice is the credit on the North Carolina resident return, which is why the Maryland return has to be completed first.
Which state should my employer be withholding for?
Maryland. The wages are sourced to Maryland, so Maryland withholding is correct and there is no North Carolina 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. North Carolina gives residents a credit for tax paid to Maryland on the same income, claimed on Form D-400TC. The credit is capped at the North Carolina tax on that income, so if Maryland taxes it more heavily the excess is not refunded by either state.
How current is this?
The North Carolina and Maryland rules on this page were last checked against North Carolina 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.
- North Carolina Department of Revenue — individual income taxaccessed 2026-08-07
- Comptroller of Maryland — individual income taxaccessed 2026-08-07
- Maryland — Form MW507accessed 2026-08-07