Applying for a Withholding Tax Exemption? Here’s What You Need to Know

Oct 22, 2021

The Maryland “Non-Resident” Real Estate Withholding Tax is 8% for Individuals (8.25% for LLCs, Estates, and Entities) on the PROCEEDS or GAINS from the sale of a property.

A Full Exemption is possible if a seller can certify any of the special situations listed below.

  • Principal Residence
  • Principal Residence — Active-Duty Military, Certain Government Employees
  • Tax-Free Exchange for purposes of 1031 of the Internal Revenue Code
  • Transferor/Seller is receiving zero proceeds from this transaction because proceeds are going to another seller/owner (ex. consignor)
  • The transfer is pursuant to an installment sale under 453 of the Internal Revenue Code
  • Transfer of inherited property is occurring within 6 months of date of death
  • Transferor/seller is the custodian of an individual retirement account (IRA)
  • The transfer is pursuant to a specific Internal Revenue Code section

A Partial Exemption is possible, especially if a seller has paid income tax in the state of Maryland.

Before a seller fills out the Exemption Request, they will need to collect:

  • Mailing Address of Buyer’s Title Company
  • Settlement Statement from Purchase
  • Preliminary/ Estimated Settlement Statement from Sale (Ask the Title Company)
  • Receipts/ Proof of Capital Improvements
  • Depreciation Deducted on Federal Returns
  • Page 1 of Sales Contract
  • Complete Exemption Form .

They will then need to print and mail these items to the following address (proof of delivery recommended):

Comptroller of Maryland Revenue Administration Division
Attn: NRS Exemption Requests
P.O. Box 2031 Annapolis, MD 21404-2031

Upon review, a full or partial Exemption Certificate will be mailed to the Title Company within 21 days of receipt.

If a Seller fails to submit the Exemption Form 21 prior to settlement, they can complete a Refund Form and follow the same instructions listed above. (Post Settlement)

If you or your client have any questions, don’t hesitate to reach out to our team.

Good luck with your sale!