Maryland Nonresident Seller Withholding in 2026

By Dawn Riley, Associate Broker, Realtor and Master Certified Negotiator | Published July 27, 2026

Maryland nonresident withholding can reduce the cash a seller receives at settlement even when the property has little taxable gain. It is a collection mechanism, not a final calculation of the seller’s tax bill.

Out-of-state owners are often surprised when a preliminary net sheet shows a large Maryland withholding amount. The surprise usually comes from treating the withholding as though it were based only on profit.

The correct strategy is to identify residency and ownership early, involve the title company and tax professional, and determine whether the seller should apply for a full or partial exemption before settlement.

Know the 2026 rates

For sales after June 30, 2025, Maryland states a withholding rate of 8.75% for nonresident individuals and 8.25% for nonresident entities. The calculation and exemptions depend on the seller, ownership form and transaction. The closing company should prepare the official settlement calculation.

Withholding is not the same as final tax

The money is collected toward Maryland income tax that may be due. The seller still files the appropriate Maryland return for the year of sale and claims the amount withheld. The final result can be higher, lower or equal depending on the tax facts.

Identify the owner type correctly

An individual, estate, trust, partnership, corporation, S corporation, business trust or limited liability company may have different filing details. Do not assume the name on an old mailing label tells the title company which tax form applies.

Review exemption options before the closing rush

Maryland provides Form MW506AE to request a certificate of full or partial exemption. The application requires supporting information and processing time. It should be discussed early with a tax professional and the title company, not started after the final settlement statement is issued.

Watch the higher-price limitation

Maryland’s 2026 Tax Alert states that nonresident transferors selling for $1,500,000 or more cannot use the tentative-refund process described in the alert and must seek the appropriate result through the annual return. Sellers at that level need tax advice before setting expectations.

Build the withholding into pricing and net decisions

The amount withheld affects available cash for mortgage payoff, moving, reinvestment and the next purchase. It should appear on early net sheets so the seller can evaluate offers based on realistic settlement proceeds.

The Bottom Line

Maryland nonresident withholding can reduce the cash a seller receives at settlement even when the property has little taxable gain. It is a collection mechanism, not a final calculation of the seller’s tax bill.

The right answer depends on the property, the records, the current rules and the client’s goals. A strong strategy should make the risk visible before it becomes an emergency.