By Adam Chubbuck
If you’ve relocated out of Maryland but still own a home here—whether in Severna Park, Annapolis, or elsewhere in Anne Arundel County—selling just became more complicated (and potentially costlier upfront). Starting January 1, 2026, Maryland increased the non-resident seller withholding tax rate for individuals, estates, and trusts to 8.75% (up from 8%).
This isn’t a brand-new tax—it’s a prepayment of your potential Maryland capital gains tax. The state holds the withheld amount until you file your non-resident return and claim any refund. But if you’re not prepared, it can tie up thousands in equity for months.
As a local expert helping out-of-state and military sellers navigate these rules daily, here’s everything you need to know about the 2026 Maryland non-resident withholding tax changes and how to minimize the impact.
The Key Change: 8.75% Withholding Rate for Non-Resident Individuals
- Non-resident individuals, estates, and trusts: Now 8.75% (increased January 1, 2026).
- Non-resident entities (LLCs, corporations): Stays at 8.25%.
This applies when a non-Maryland resident sells real property in the state. The title company or settlement agent must withhold and remit the amount to Maryland—unless you qualify for an exemption.
How the Withholding Is Calculated (It’s Not on the Full Sales Price)
Maryland withholds 8.75% of the “total payment” to the seller—not the gross sales price. The formula subtracts standard deductions first:
Total Payment = Sales Price – (Real Estate Commissions + Transfer & Recordation Taxes + Payoff of Existing Mortgages/Liens + Other Allowable Closing Costs)
Example: You sell your Severna Park home for $500,000. After commissions, taxes, and paying off your $300,000 mortgage, your net proceeds (“total payment”) are $150,000. Withholding = $150,000 × 8.75% = $13,125 held by the state.
You get the rest at closing, but wait for your refund when filing.
Avoid the 21-Day “Trap”: File for Exemption Early
The biggest pitfall for out-of-state sellers? Waiting too long to address withholding. If you think you’ll owe less (or nothing) due to a loss, principal residence exclusion, or 1031 exchange, act fast.
Use Form MW506AE (Application for Certificate of Full or Partial Exemption):
- Submit to the Maryland Comptroller at least 21 days before closing.
- If approved, you get a certificate reducing or eliminating withholding.
- Miss the deadline? The full 8.75% is withheld—no exceptions.
Common Reasons You May Qualify for Exemption or Reduction:
- Sale results in no capital gain or a net loss.
- Property was your principal residence for at least 2 of the last 5 years (or met exceptions like military PCS orders).
- You’re doing a 1031 tax-deferred exchange.
- Other qualifying situations (e.g., zero proceeds to seller).
Pro tip: Start this the moment you’re under contract—delays can cost you big.
Why You Need a Local Expert for Out-of-State Maryland Home Sales
Selling from afar means coordinating paperwork across states, timelines, and tax rules. One missed deadline, and your equity sits with the state while you wait months for a refund.
That’s where experience matters. Adam Chubbuck and the Team Alpha Charlie at Douglas Realty, LLC specialize in helping out-of-state sellers, military families (PCS moves), and investors tackle the 2026 Maryland non-resident withholding tax changes smoothly.
We:
- Review your situation early.
- Prepare and submit Form MW506AE right away.
- Coordinate with title companies and the Comptroller.
- Maximize your net proceeds so your money stays in your pocket—not Maryland’s.
Whether your property is in Severna Park, Annapolis, or anywhere in Anne Arundel County, Adam Chubbuck is the trusted local Realtor® who knows these technical details inside out. Clients choose him because he turns potential headaches into seamless closings.
Ready to Sell Your Maryland Home Stress-Free?
Don’t let the 2026 withholding hike surprise you at closing. Contact Adam Chubbuck today for a no-obligation consultation—we’ll review your specifics and guide you through every step.
📞 Call or text: 443-422-3628 🌐 Douglas Realty, LLC | Serving Severna Park, Annapolis & Anne Arundel County
Have questions about the new rate or exemptions? Drop a comment below—I’m here to help!
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