WITHHOLDING REQUIREMENTS FOR SALE OF REAL
PROPERTY BY MARYLAND NON-RESIDENTS
If a seller of residential real estate in Maryland is not a resident of this state, and if they have not been so for at least two of the last five years, a payment must be made at the time of sale for withholding taxes which may be due. Even if the seller has been a Maryland resident for two of the last five years, withholding will still be required if the property was not listed as their principal residence with the State Department of Assessments and Taxation. This payment must be made to the Clerk of the Court or the Maryland Department of Assessments and Taxation prior to the acceptance of a deed for transfer of ownership of the property.
The title company is generally responsible for collecting these funds and remitting them to the Clerk or Department when the deed is presented for recording. The amount required to be withheld has changed periodically since the requirement was first instituted. For deeds presented for recording on or after June 1, 2012, the rate for individuals increases from 6.75% to 7%. The rate for non-resident business entities remains at 8.25%.
It is important to recognize the possibility of a seller’s status as a non-resident for withholding purposes, and to alert the seller about the potential requirement for withholding. Although it is possible to obtain a certificate of exemption if there is no gain to be realized from the sale, processing for the request for exemption can take weeks or months, so the process should be commenced at least in the early days of a listing with a non-resident seller. If there are multiple sellers, each would be required to withhold as to their pro-rata ownership share. There could be some sellers who are residents and do not need to withhold, and others who are non-residents and must withhold.
James E. Savitz