Maryland Non-Resident Real Property Tax Withholding
In this video Deirdre P Brown discusses the real property tax withholding required when a non-resident of Maryland sells real property located in Maryland.
Hello this is Deirdre Brown your settlement agent serving Maryland, DC and Virginia. Today we're going to talk about Maryland transactions where the seller is a non-resident in the state of Maryland.
If your seller is a non-resident we, the title company, are required to take additional tax withholdings and send it to the state of Maryland. If the seller is an individual we are required to take 7.5% of the proceeds and send it to Maryland. If the seller is an entity, an LLC or corporation, we are required to take 8.25% of the proceeds and send it to the state of Maryland.
There are some exceptions. Some of the bigger exceptions are for example if your entity has been registered in the state of Maryland to do business more than 90 days before the sell then we do not need to take that withholding.
If you are an individual there is a form you can fill out and send to the office of tax in revenue requesting an exemption from the withholding. Some of the major exceptions on that form that you may be able to qualify for is maybe you're selling the property but you are not getting any proceeds back or you need to come to the table with money. The tac=x office may say that we don't need to take the withholding. Or maybe you lived in the property as your principal residence you moved out recently to purchase another property and now you're selling this one and in that case you would just need to show Maryland that you actually had lived in the property as your principal residence for two of the last five years and that you paid personal property taxes in Maryland using that address.
Once you fill out the exemption application send it to the Maryland Office of Tax and Revenue. There is a section on the application for you provide the contact information for your title company. The office of tax and revenue will send will actually send your title company a certificate showing that we no longer are required to withhold the funds.
One of the questions that comes up often is what if there's two owners, one of is a resident and one is a non-resident. In this case we only take the withholding on a percentage of the proceeds that the non-resident is receiving.
If you have title related questions please feel free to reach out to me at closewithdee.com