by Susan Pruden
May 4, 2019
Non-resident seller withholding
If you are selling an investment property in Maryland and don't live in Maryland, you may have funds withheld at settlement. As of October 2018, the rate is 7.5% for nonresident individuals and 8.25% for a nonresident entity. You might wonder why the withholding exists, but it's fairly simple - most sellers forget to file a State of Maryland tax return after settlement and whatever capital gains that might be due to the state are lost.
It is a withholding, not a tax, much like the taxes that are withheld from a paycheck. You can file for any refund that may be due within 60 days of settlement. There is great information buried on page 5 of a booklet put out by Maryland called MARYLAND'S WITHHOLDING REQUIREMENTS for Sales or Transfers of Real Property and Associated Personal Property by Nonresidents. The rest of the booklet is helpful, but the FAQ that starts on page 5 are actually written in plain English.