When someone who lives outside Maryland sells Maryland real estate, the clerk may not record the deed unless a payment of Maryland income tax comes with it: 8.75 percent of the net proceeds for an individual, estate or trust, 8.25 percent for a business entity. It is collected on the Comptroller's Form MW506NRS, filed with the deed, and credited to the seller's Maryland income tax for the year.
This page explains who the rule reaches, how the amount is figured, the six exemptions, the form and how it is filed, and why a gift deed is outside it altogether.
What the Statute Does
Maryland's income tax law covers a sale or exchange of real property owned by a nonresident or nonresident entity. The deed that changes ownership may not be recorded with the clerk of the circuit court unless a payment is made to the clerk. For an individual the rate is the sum of the lowest county income tax rate and the top State income tax rate; for an entity it is the corporate income tax rate. The Comptroller's tax alert sets the current figures: since July 1, 2025, 8.75 percent for individuals, estates and trusts, raised when the 2025 budget act increased the top State rate, and 8.25 percent for entities.
The payment is not a separate tax. The statute says the amounts collected are deemed paid to the Comptroller on behalf of the seller and credited against the seller's income tax for the year of the sale. A seller who owes less files a Maryland return and gets the difference back, or applies earlier for a tentative refund. The statute also says the settlement agent, title company, lender, real estate agent and buyer are not liable for amounts that should have been collected. The clerk is the collector.
Who Is a Nonresident
An individual is a nonresident if not a Maryland resident for income tax purposes on the date of transfer. The statute defines the terms for entities. A nonresident entity is one that is not formed under Maryland law and not qualified by or registered with the State Department of Assessments and Taxation to do business in Maryland. A resident entity is one formed in Maryland, or formed elsewhere and registered here. So an out-of-state company that registered with the Department before selling is treated as a resident and is not withheld on.
Where a property has several owners, each nonresident owner is withheld on separately, on that owner's share of the proceeds, and files a separate form. Spouses filing a joint Maryland return file one.
How the Amount Is Figured
The rate is applied to the total payment, which the statute defines as the net proceeds actually paid to the seller, plus the fair market value of any property the seller receives. Net proceeds means the sales price less two things: debts of the seller secured by a mortgage or lien on the property that are paid off at the sale, and the seller's other expenses of the sale shown on the settlement statement, such as the commission and the seller's closing costs. Adjustments in the seller's favor on the settlement statement, such as a tax proration credit, are not deducted.
Form MW506NRS follows the same arithmetic in Section 8: the total sales price, less selling expenses, less debts secured by mortgages or liens, gives the total payment; multiplied by the seller's ownership percentage, then by 8.75 or 8.25 percent, gives the tax withheld. Where the Comptroller has issued a certificate of partial exemption, the certificate's figure is entered instead.
A worked example. A nonresident individual sells a house for $400,000, pays off a $250,000 mortgage at closing, and pays $28,000 in commission and closing costs. The total payment is $122,000, and the withholding is $10,675. A sale in which the mortgage payoff and costs exceed the price has a total payment of zero, and nothing is withheld.
The Six Exemptions
The statute says the payment is not required when:
- Each seller certifies residency. A certification under penalties of perjury that the seller is a Maryland resident or a resident entity, either in the recitals or acknowledgment of the deed or in an affidavit recorded with it. In a deed the line reads, in substance: "The grantor certifies under penalties of perjury that the grantor is a resident of the State of Maryland."
- The Comptroller has issued a certificate that no tax is due, that a reduced amount is due and what it is, or that the seller has paid or secured the liability. The application is Form MW506AE, filed with the Comptroller before closing.
- The transfer is a foreclosure or a deed in lieu of foreclosure.
- The property is transferred by the United States, the State, or a unit of the State.
- Each seller certifies that the property is the seller's principal residence, in the deed or a recorded affidavit.
- The deed includes a statement of consideration showing the consideration payable is zero.
The last one is the exemption for a family quitclaim deed. Maryland already requires every deed to state the consideration, including any assumed mortgage, in its recitals or an affidavit. A deed that says the consideration is zero is outside the withholding law whatever state the grantor lives in. A deed that recites an assumed mortgage is not a zero-consideration deed, and the law does not clearly say how withholding works for it: the statute deducts only a mortgage that is being paid off at the sale, while the Comptroller's form deducts any mortgage. Before recording, ask the Comptroller, using an exemption certificate request on Form MW506AE.
The Form and How It Is Filed
Form MW506NRS, the Maryland Return of Income Tax Withholding for Nonresident Sale of Real Property, has four copies. Copies A and B are filed with the deed when it is presented to the clerk of the circuit court, with a check or money order for the tax payable to the clerk for the county or Baltimore City. Copy C goes to the seller at closing, and the person who prepared it keeps Copy D. A separate form and separate payment are filed for each nonresident seller. The form is signed under penalties of perjury by the seller, an authorized officer, or the person responsible for closing.
The clerk pays the money over to the Comptroller within 30 business days, and it is credited to the seller. The seller then files a Maryland nonresident income tax return for the year, reports the gain or loss on the sale, and receives a refund of any excess. A seller who does not want to wait applies on Form MW506R for a tentative refund, which the Comptroller's 2026 alert says is no longer available where the sales price was $1,500,000 or more; those sellers claim any refund on the annual return.
The date of transfer on the form is the deed's effective date under the recording statute, the later of the last acknowledgment and the date on the deed.
Maryland Nonresident Seller Withholding — Common Questions
What is Maryland's nonresident seller withholding?
A prepayment of Maryland income tax collected when a person or company that does not live in Maryland sells Maryland real estate. The statute says a deed that changes ownership may not be recorded unless a payment is made to the clerk of the circuit court equal to 8.75 percent of the total payment to a nonresident individual, or 8.25 percent for a nonresident entity, unless an exemption applies. The Comptroller credits the amount to the seller's Maryland income tax for the year of the sale, and the seller settles up, or claims a refund, on a Maryland return.
Does it apply to a quitclaim deed given as a gift?
No. The statute lists a deed that includes a statement of consideration showing the consideration payable is zero among the transfers the withholding does not apply to. A gift deed from an out-of-state parent to a child, or into a trust, needs no withholding and no form when its statement of consideration shows zero. A deed under which the child takes over a mortgage cannot show zero; for that case, ask the Comptroller before recording, as explained above. The consideration statement Maryland already requires in every deed is what proves it.
How is the amount figured?
On the total payment. That is the statute's term for the net proceeds actually paid to the seller: the sales price less mortgages and liens paid off at the sale and less the seller's selling expenses shown on the settlement statement, plus the value of any property the seller receives instead of cash. Form MW506NRS walks through it line by line. On a $350,000 sale with a $200,000 mortgage paid off and $24,500 of commissions and costs, the total payment is $125,500 and the withholding for an individual is $10,981.25.
How does a seller avoid it?
Six ways, each in the statute. A certification under penalty of perjury, in the deed or an accompanying affidavit, that the seller is a Maryland resident or resident entity. A certificate from the Comptroller, applied for on Form MW506AE, that no tax or a reduced amount is due. A transfer by foreclosure or deed in lieu of foreclosure. A transfer by a government. A certification, in the deed or an affidavit, that the property was the seller's principal residence. Or a deed stating zero consideration. A seller who does not fit any of them pays at recording and applies afterward for a refund of any excess.
What counts as a nonresident?
For an individual, anyone who is not a Maryland resident for income tax purposes on the date of transfer. For an entity, the statute is specific: a "nonresident entity" is one that is not formed under Maryland law and is not qualified or registered with the State Department of Assessments and Taxation to do business in Maryland. A Delaware limited liability company registered to do business in Maryland is a resident entity and is not withheld on; one that never registered is.
Official Sources
Maryland's laws are collected in the Maryland Code, arranged in named articles, and a citation such as Tax-General § 10-912 is an address: the article, then the section. Each links to the section on the General Assembly's website, or to the Comptroller's own publication, and opens in a new tab.
- Tax-General § 10-912 — the withholding: net proceeds and total payment defined, nonresident and resident entities, the payment to the clerk before recording, the six exemptions, the credit to the seller, and the tentative refund procedure.
- Tax-Property § 12-104 — the statement of consideration every deed carries, which is what the zero-consideration exemption refers to.
- Real Property § 3-201 — the effective date of a deed, which is the date of transfer on the form.
- Comptroller of Maryland — Form MW506NRS (2026) — the return, its four copies, the line-by-line instructions and the current rates.
- Comptroller of Maryland — Tax Alert on the withholding rate change — the 8.75 percent rate from July 1, 2025, and the tentative refund rule for sales of $1,500,000 or more.
Rates checked against the Maryland Code and the Comptroller's form and alert on September 3, 2026.