The non-resident seller withholding transfer tax, which is charged to sellers who are out of state without certain requirements, has been reduced from 7.5%.
**PLEASE NOTE — THIS IS FROM 2011. THE LAW AND % CHARGE, AS WELL AS ADDENDA MAY CHANGE AT ANY TIME.** MAKE SURE TO CHECK WITH THE MARYLAND STATE GOVERNMENT, YOUR REAL ESTATE AGENT, OR LAWYER FOR UPDATED INFORMATION AND FORMS.**
This withholding tax has been charged to sellers who moved, many estates, and other sellers of homes in the State of Maryland.
Luckily the reduction should help sellers who had to move out of town prior to selling their Maryland homes.
According to the new form, as put out by the Maryland Association of REALTORS(R),
“As defined under Maryland law and as used in a) and b) above, the term “total payment” means the net proceeds paid to the Seller for the Property and associated tangible personal property, less: 1) debts owed by the Seller and secured by a mortgage or other lien against the Property being paid upon the sale or exchange of the Property and 2) other expenses of the Seller arising out of the sale or exchange of the Property and disclosed on a settlement statement prepared in connection with the sale or exchange of the Property. “Total payment” includes the fair market value of any property transferred to the Seller.”
As always, you will want to contact an attorney for legal advice and a tax accountant for tax advice if you are a Maryland out-of-state seller.
Please note that all Maryland Association of REALTORS(R) forms are copy-written, and are for the use only of Maryland REALTORS(R) and their clients in a transaction, and may not be changed in any way without written permission from the Maryland Association of REALTORS(R).
Great information Marney!!!!
Thanks, Doug! I appreciate your input! I hope you learned a lot in the sessions at the conference yesterday!
Marney,
Which of the scenarios below is charged the most real estate transfer tax?
1. Sell home while still a MD resident
OR
2. Move out of state, then sell MD home as a non-resident
This move is not job-related.
I will appreciate your input on this topic. I have been unable to find this info on my own.
Thank you,
Kathie Zink
Hi Katie!
The transfer tax is the same.
It is the withholding tax that the state charges that would make the difference. It does not matter why you move out of state.
If you sell your home while still living in Maryland, you would not be subjected to the withholding tax.
If you sell your home AFTER you move OUT OF MARYLAND, you would be subject to the tax on any proceeds you receive on the house — and it is taken out at settlement (not paid through your taxes later. The title company must collect this.)
Here is a link to the forms from the Comptroller’s office as of August 2012:
http://forms.marylandtaxes.com/12_forms/Withholding_requirement.pdf
I will send you an email, too, because I am curious about the situation, and can forward more information if needed.
Thank you, Kathie!
Do I understand that if I sell my house in Maryland and move to another State I will have to pay this TAX???
Hi John Paul, If you move out of state PRIOR to selling your home in Maryland, then your proceeds from the sale would most likely be subject to this tax.
If you’d like more details, please let me know.
Thank you!
Can you tell me what year this was put into law.
Hi John Paul, it appears in 2003. From what I understand, there may have been additional changes/restrictions since then — here is a link to the Comptroller’s State of Maryland Withholding Requirements: http://forms.marylandtaxes.com/12_forms/Withholding_requirement.pdf
I hope this helps!
You would only be taxed in Maryland on the recognizable gain on the sale of your residence. If you do not have a recognizable gain, then no tax. However, MD may withhold unless you can prove to them no taxable gain, usually about 45 days before selling.
Thank you, Bea!
When selling a residential property in West Virginia while a Maryland resident, you’re subject to West Virginia sales taxes at closing. Does Maryland tax this as an earned income or other tax from the profit at sale?
Hi Vince, That is a good question for a tax professional. It is a withholding tax charged by the state. Here is a link to the withholding requirements from the state. http://forms.marylandtaxes.com/12_forms/Withholding_requirement.pdf
How long after someone moves out of MD is she considered a non-resident?
Hi Tina,
One of the title companies that I work with was instructed by the state to collect the tax, and the seller had just moved a few weeks prior to closing. Whether the seller were able to go back to the state later and collect that money back, I do not know.
Your best bet is to speak with a tax professional, or an attorney, to understand an individual circumstance.
Here is a link to the withholding requirements for taxes from the State of Maryland as of 2012: http://forms.marylandtaxes.com/12_forms/Withholding_requirement.pdf