Understanding Maryland’s Nonresident Withholding Tax When Selling Real Estate
If you live outside of Maryland and are selling property here, there’s an important state tax requirement you should know about: Maryland’s Nonresident Withholding Tax.
I often get questions from sellers asking how to minimize or avoid this tax. I want to be very clear — I am a licensed Realtor®, not a tax professional. I cannot advise you on how to reduce or eliminate the tax or guide your tax filing decisions. For that, you should always consult a CPA, tax advisor, or attorney who specializes in Maryland tax law.
What I can do is explain how the process works in a Maryland real estate transaction and how it affects your closing so you’re prepared and confident through your sale.
What Is Maryland’s Nonresident Withholding Tax?
When a nonresident property owner sells real estate located in Maryland, state law requires a portion of the sale proceeds to be withheld at settlement and submitted to the Comptroller of Maryland.
Current Rates (Effective January 1, 2026)
Nonresident individuals: 8.75% of the total sales price
Nonresident entities (e.g., corporations, some LLCs): 8.25% of the total sales price
This withholding is not an additional tax — it’s an estimated prepayment toward the Maryland income tax you might owe because of the sale.
If there are multiple nonresident owners, each owner is responsible for their proportional share of the withholding.
Can You Get an Exemption or Reduction?
Maryland allows nonresident sellers to apply for a Certificate of Full or Partial Exemption from withholding.
Full Exemption: No withholding required
Partial Exemption: A reduced amount is withheld
To request an exemption, you must file the appropriate forms with the Comptroller of Maryland before settlement (often at least 21 days prior).
👉 Because this involves tax calculations and supporting documentation, you should work with your tax advisor or attorney when preparing an exemption request. Title companies and Realtors® can accept the forms, but cannot provide tax advice.
What Happens After the Sale?
After closing, most nonresident sellers are required to file a Maryland income tax return for the year of the sale.
The amount withheld at settlement is reported on that return and credited toward your tax liability. If too much was withheld, you may be eligible for a refund once your return is filed and processed.
Only a qualified tax professional can advise you on:
What income to report
Whether you owe additional tax
How to claim refunds
Practical Tips for Nonresident Sellers
Start early: If you plan to apply for an exemption, talk to your tax advisor as soon as your contract is signed.
Be transparent with your Realtor®: Your residency status impacts timelines and paperwork.
Coordinate with your title company: They handle collection and remittance of withholding at closing.
Plan for closing costs: Withholding is calculated on the sales price, not your profit.
