After receiving a few questions about Maryland’s non-resident withholding tax (often called the exit tax), I thought it would be a good time to clear things up. It’s one of those topics that catches a lot of sellers off guard — and nobody likes surprises at the closing table.

So let’s break it down in plain English: what it is, how much it is, who it applies to, and why Maryland collects it in the first place.

💰 What It Is
In simple terms, if you sell a property in Maryland but you’re not a Maryland resident at the time of sale, the state requires the title company to withhold a percentage of your profit (or in some cases, the sales price) at closing.

It’s Maryland’s way of making sure it gets its share of income taxes right away — rather than waiting for you to file a Maryland tax return later (which you still have to do).

Think of it like an advance payment of taxes before you ride off into the sunset.

📊 The Current Percentages
Here’s what the state will hold back at closing:
- 8% of the gain for individual sellers.
- 8.25% for non-resident business entities (LLCs, corporations, etc.).

👉 This money doesn’t just disappear. It’s sent directly to the Comptroller of Maryland. Later, when you file your Maryland tax return, you’ll either:
- Get a refund if too much was withheld, or
- Owe more if not enough was withheld.

👥 Who It Applies To
This applies if you:
- Are a non-resident of Maryland when you sell (your primary home is in another state).
- Own Maryland real estate (house, condo, land, rental property, etc.).

It does not apply if you are a Maryland resident selling your primary residence here.

🧐 Why Does Maryland Collect It?
Maryland’s reasoning is pretty simple: once you move out of state, it’s a lot harder for them to collect taxes from you later. By withholding at closing, they guarantee that Uncle Maryland gets his cut.

So really, it’s less about punishing people for leaving and more about making sure the state doesn’t lose track of you (and your tax bill).

🚦 Bottom Line
If you’re selling Maryland property but you’re no longer a Maryland resident, expect to see the non-resident withholding tax pop up at your closing. It can feel like a surprise expense if you’re not prepared — which is why I always recommend talking with your title company and tax professional early in the process.

And don’t worry — there are exemptions and special rules (especially for military families), which I’ll cover in the next part of this series. Stay tuned for Wednesday’s post: “Who Has to Pay, Who Doesn’t? Common Exemptions Explained.”

💬 Thinking about selling your Maryland home while living out of state? Let’s chat. I can walk you through what to expect, connect you with the right professionals, and make sure you don’t get blindsided by taxes at the closing table. 

P.S. Follow all my bolgs at: https://www.germanrealtor.com/blog

Kat Moore | Realtor | Advisor
Samson Properties
📞 410-414-5967 (cell), 443-975-7555 (office)
📧 kat@germanrealtor.com
🌐 www.germanrealtor.com

The Kat Walk To Homeownership

Disclaimer

This blog post is provided for general informational purposes only and reflects my perspective as a licensed real estate agent. It does not constitute legal, tax, or financial advice. Laws and regulations can change, and individual circumstances vary. Please consult a licensed tax professional, attorney, or other qualified advisor for advice specific to your situation.