Withholding Requirements for Sales of Real Property by Nonresidents

If you are a nonresident who owned and sold or transferred real property and associated tangible personal property in Maryland, you must make a tax withholding payment to the local Clerk of the Circuit Court or the Maryland Department of Assessments and Taxation (MDAT). The payment must be made before the deed or other instrument of transfer is recorded with the court clerk or filed with MDAT.

In the case of a nonresident individual, the payment is 6.75 percent of the total property sale payment made to the individual. A nonresident entity must make an 8.25 percent payment.

Under this provision, a nonresident entity is an entity that is:

• not formed under the laws of Maryland more than 90 days before the date of the sale of the property, and
• not qualified by or registered with MDAT to do business in Maryland more than 90 days before the date of the sale of the property.

In the case of multiple owners, withholding is required from each of the nonresident owners based on the percentage of the total payment that represents each nonresident's ownership percentage.

You must complete Form MW506NRS, Return of Income Tax Withholding for Nonresident Sale of Real Property, and present copies A and B of Form MW506NRS to the clerk or MDAT, along with payment.

In addition to filing Form MW506NRS with a tax withholding payment, you are still required to file an end-of-the-year income tax return with Maryland for the year in which the sale occurred.

For more information, see Increase in the Withholding Rate for the Sale of Property by a Nonresident and Maryland's Withholding Requirements for Sales or Transfers of Real Property and Associated Personal Property by Nonresidents.