Selling property in Maryland as a nonresident comes with specific tax obligations, including the Nonresident Withholding Tax. If you're preparing to sell, it's crucial to understand this tax to avoid any surprises and ensure a smooth transaction.
What is the Nonresident Withholding Tax?
When nonresident property owners sell real estate in Maryland, an 8% withholding tax on the sale price is required at settlement. This amount is sent to the Clerk of the Circuit Court or the State Department of Assessments and Taxation (SDAT). If multiple owners are involved, each is responsible for their proportional share of the tax.
Exemptions from the Withholding Tax
Nonresident sellers may be eligible for a Certificate of Full or Partial Exemption. To qualify, submit a request to the Comptroller of Maryland at least 21 days before settlement. A Full Exemption means no withholding tax is required, while a Partial Exemption allows deductions, such as your remaining mortgage balance, to reduce the amount owed.
How to Seek a Refund
If you've overpaid the withholding tax, you can apply for a refund 60 days after the sale. Remember, nonresident sellers must also file a Maryland income tax return for the year the property was sold, ensuring full compliance with state tax regulations.
Key Tips for a Hassle-Free Sale:
Prepare Early: Submit exemption applications as soon as your sales contract is signed.
Keep Documentation Handy: Have all forms and paperwork ready for settlement.
Remember Tax Filing: File your Maryland income tax return promptly after the sale.
Ready to Sell Your Maryland Property?
Selling as a nonresident can be overwhelming, but it doesn't have to be. With expert guidance, you can navigate tax obligations and close your sale smoothly.
Not ready to sell yet? Download my free seller’s guide to gain insights into the process and be prepared when the time comes.
Need Legal or Tax Advice?
I collaborate with a network of trusted legal and accounting professionals who specialize in nonresident real estate sales. If you need a referral, I’m happy to connect you with someone who can help.
Disclaimer: This post is for informational purposes only and should not be considered legal or accounting advice. Seek professional assistance to ensure compliance with Maryland's tax laws.
