If you sell real estate in Maryland but are not a resident, you may be subject to the Nonresident Withholding Tax.
All nonresidents of Maryland who sell or transfer real property in Maryland must make a tax withholding payment to either the property’s local Clerk of the Circuit Court or the State Department of Assessments and Taxation (SDAT). If the seller is not able to certify exemption from withholding, the title company will pay the withholding to the state and withhold from seller proceeds. Nonresident individual tax withholding amounts are 8% of the total property’s sale price or a percentage equal to how much of the property an individual owns if there are multiple owners. Only nonresident’s shares are due if some owners are Maryland residents.
Full or Partial Exemptions may be issued if the owner submits a request to the Comptroller of Maryland at least 21 days prior to closing. A Partial Exemption means the owner is only responsible for paying a withholding tax on the net proceeds of the property sale, whereas a full exemption means the owner pays no tax at the sale. In order to be eligible for a full exemption, the owner must meet certain requirements. In addition to the Nonresident Withholding Tax, the owner(s) must file an income tax return with Maryland for the year the property was sold.
