When Credit for Preservation and Conservation Easements has been entered, and Federal return is reporting itemized deductions, the amount included in the federal deduction should be included on Maryland Form 502, line 17b as an add back. The credit is later calculated on 502CR, and reported on Form 502, line 24.

Lacerte is only including the State and local income taxes on line 17b, expecting to see the amount of PCC allowed on Federal Schedule A to be included here.

The following informational diagnostic is produced;

e-file: An amount has been claimed on 502CR for the Preservation or Conservation Easement credit. Per the instructions, this amount should be added back to the State and Local Income Taxes line in the Itemized Deduction Method of the main return. (ref. #46007)

Clicking on the diagnostic directs you to Maryland Credits;

F1 Screen 53.271, Maryland Credits -

  • Code 90: Enter any amounts reported on the federal return as an itemized deduction for contributions of Preservation or Conservation Easements for which a credit is claimed on Form 502CR. The amount will be used to reduce the deductions from the federal return and will be reported with the addition for state and local income taxes for Form 502 or Form 505 per the instructions.
  • Code 91: Enter any amounts reported on the federal return as an itemized deduction for contributions of Preservation or Conservation Easements for which a credit is claimed on Form 502CR. The amount will be used to reduce the deductions from the federal return and will be reported with the addition for state and local income taxes for Form 502 or Form 505 per the instructions.

Form 502 Instructions (page 11):

14 ITEMIZED DEDUCTIONS. 
If you figure your tax by the ITEMIZED DEDUCTION METHOD, complete line 17a and b on Maryland Form 502. (See Instruction 16 to see if you will use the ITEMIZED DEDUCTION METHOD.)

Copy the amount from federal Form 1040, Schedule A, line 17, Total Itemized Deductions, on line 17a of Form 502. Certain items of federal itemized deductions are not eligible for State purposes and must be subtracted from line 17a. State and local income taxes used as a deduction for federal purposes must be entered on line 17b. Also, any amounts deducted as contributions of Preservation or Conservation Easements for which a credit is claimed must be added to line 17b.

You are not required to itemize deductions on your Maryland return because you have itemized deductions on your federal return. Figure your tax each way to determine which method is best for you.

If your unreimbursed business expenses include depreciation to which an adjustment is required for Maryland purposes, complete Form 500DM to calculate the addition modification “l” or subtraction modification “bb.”

Solution:

This issue is scheduled to be resolved in a product update 04/30/2019 (Version 39.0430).

A manual adjustment code was added in Screen 53.271, Maryland Credits. This adjustment can be utilized to add the amount of credit generated for Preservation and Conservation Easements.

Follow these steps to locate this adjustment field;

  1. Go to Screen 53.271, Maryland Credits.
  2. Scroll down to the Credit for Preservation and Conservation Easements section.
  3. Enter the amount to be included as an addition, in the field Additional to state and local income taxes itemized deductions [A] (code 95).
Entering a positive number will increase the current amount reported while entering a negative amount will reduce the current amount reported.