500DM: Decoupling Modification (2024)
Maryland · Comptroller of Maryland · Used for tax years 2024
Maryland Form 500DM calculates income adjustments required because Maryland does not follow certain federal tax provisions. It reports differences in depreciation, net operating loss deductions, certain debt-related income and deductions, and other affected items, including decou
Who files this form
Use Form 500DM if your Maryland return is affected by a federal provision from which Maryland has decoupled, meaning Maryland does not follow that federal tax treatment. The provision may have been used in any tax year.
The listed provisions cover certain CARES Act changes, special depreciation allowances, certain farming-loss NOL carryovers, Section 179 deductions, higher depreciation deductions for certain heavy-duty SUVs, and certain deferred debt income or original issue discount deductions.
Pass-through entities must submit Form 500DM with Form 510 or 511 and give each partner, shareholder or member a statement showing their share of the modification. Members who receive a decoupling modification from a pass-through entity must also complete Form 500DM.
What you'll need
- Your federal return as filed, for the amounts in Column 1.
- Separate pro forma federal and Maryland returns, prepared without the decoupled provisions, to calculate the modification and related changes.
- Your taxpayer name and taxpayer identification number.
- If NOL deductions involve more than one loss year, a schedule showing the line 2 amounts for each loss year.
- If you receive a modification from a pass-through entity, its statement showing your share.
- If you file an amended return, the completed Form 500DM, schedules and pro forma returns must be attached.
A revised Form 502CR is required if you claimed a credit for tax paid to another state on the original return and decoupling changes the tax liability to that state or Maryland.
How to file
Attach the completed Form 500DM to your Maryland income tax return.
- Original return: Do not file the pro forma returns with the Comptroller of Maryland or the IRS. Keep them with your tax records.
- Amended return: Attach Form 500DM, schedules and pro forma returns.
- Pass-through entity: Submit Form 500DM with Form 510 or 511. No adjustment is made on the entity’s Maryland return, but each partner, shareholder or member must receive a statement showing their share of the modification.
The supplied text does not give mail or e-file directions or a filing address.
Common mistakes
- Forgetting the attachment: Attach the completed Form 500DM to your Maryland return.
- Sending pro forma returns with an original return: Keep them in your records instead. For an amended return, attach them along with Form 500DM and schedules.
- Putting a pass-through entity modification on lines 1 through 4: Report it on line 7 and use code dp on the member’s return. Do not include that modification on the Maryland pro forma return.
- Using a separate code for line 3: The instructions say there is no separate code because this decoupling also involves line 4. Use code dm for multiple decoupling.
- Overlooking a revised Form 502CR: If a credit for tax paid to another state was claimed and decoupling changes either state’s tax liability, complete a revised Form 502CR using the returns as filed, including amendments and modifications.
Questions people ask
What does Form 500DM calculate?
It calculates the addition or subtraction modification needed to eliminate the effect of certain federal tax provisions on Maryland and local taxes.
How do I calculate Column 3?
For lines 1 and 2, subtract Column 2 from Column 1. For lines 3 and 4, subtract Column 1 from Column 2. Enter a negative result with a minus sign. Line 5 captures other related changes that affect taxable income.
What if the net modification on line 6 is negative?
Report it as a positive number on the appropriate subtraction line of your Maryland return. Use the applicable code from the instructions. A positive line 6 amount goes on the appropriate addition line.
How do I report a modification from a pass-through entity?
Enter your share on line 7 and use code dp on your return. A positive amount is an addition. A negative amount is reported as a positive number on the appropriate subtraction line. Related changes determined using the federal pro forma return go on line 5.
Where can I ask questions about Form 500DM?
Contact the Taxpayer Services Division at 410-260-7980 or toll-free at 800-638-2937. The form also lists marylandtaxes.gov.