Withholding Requirements for Sales of Real Property by Nonresidents

If your nonresident client owns and is selling or transferring real property and associated tangible personal property in Maryland, they must make a tax withholding payment to the local Clerk of the Circuit Court or the Maryland Department of Assessments and Taxation (SDAT). The payment must be made before the deed or other instrument of transfer is recorded with the court clerk or filed with SDAT.

Generally, the person responsible for the closing, a title company for example, is responsible for ensuring that sufficient funds are withheld at settlement and for paying the amount of withholding tax due to the Clerk or Department when the deed or other instrument of transfer is presented for recordation.

If your client is a nonresident individual, the payment is 6.75 percent of the total property sale payment that was made to your client. 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 SDAT 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.

At settlement, the nonresident seller must complete Form MW506NRS, Return of Income Tax Withholding for Nonresident Sale of Real Property. The settlement agent must then present Copies A and B of Form MW506NRS to the clerk or SDAT, along with payment.

In addition to filing Form MW506NRS with a tax withholding payment, the nonresident seller is 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 Maryland’s Withholding Requirements for Sales or Transfers of Real Property and Associated Personal Property by Nonresidents and the relevant forms.