Maryland Real Estate Non-Resident Seller Withholding Tax - What You Need to Know

Ryan Haley, owner and broker of Atlantic Shores Sotheby’s International Realty, discusses withholding tax sellers who are non-residents of Maryland. 

Non-residents of Maryland selling a property at the beach or anywhere else in Maryland will be subject to 8% non-resident withholding tax. 

This is essentially put in place to account for the capital gains tax from the state’s side. 

The tax will be withheld from the total payment at the time of settlement. The total payment is calculated by taking the sales price when you sell minus any commissions, transfer taxes, debts owed on the property. The result is multiplied by 8%, which will be withheld by the State of Maryland until you file your Maryland tax return. 

What is not considered is the actual basis for the property or what the seller actually paid for the property. But as long as you have 21 days from the date of contract acceptance until you close, you can work with the comptroller’s office to not just have an estimated withholding number but calculate an exact figure if there is actually a capital gain on the property. The comptroller’s office will calculate and look at your basis for the property and consider depreciation over the years to come up with the tax liability. 

Some think that this is an exit tax and a way to go after the non-residents, but that is really not the case. It is simply just the State of Maryland securing its portion of the state capital gains tax. 

If you need further help with your unique situation when selling your property, it is always best to consult your accountant or tax attorney. 

Should you have any questions about selling or buying at the beach or in Maryland and Delaware, please connect with us at 410.524.0919, and we will be happy to help you out.