I have several individuals that reside in DE, but work in MD. Since their employment was in MD, they collected MD unemployment benefits. To take credit for taxes paid to the State of MD on their DE tax returns, they need to file MD non-resident return (Form 505).

Unfortunately, State of MD could not answer my question when I talked to them. Logically, I don't think that non-residents should be penalized and pay MD tax on unemployment benefits; they work and pay taxes to the State of MD and should be eligible to receive the same benefits as residents. In addition to regular tax, there is also a special "non-resident" tax of 1.75% imposed by the State of MD increasing taxes for non-residents.