This page explains Maryland nonresident seller withholding in plain English.
Many people focus on the deed, transfer tax, and recordation tax, but Maryland has another issue that can surprise sellers: if the transferor is not a Maryland resident, Maryland income tax withholding may be required at the time of the real property transfer.
Important Maryland Withholding Note:
Maryland Form MW506NRS is the Maryland Return of Income Tax Withholding for Nonresident Sale of Real Property.
The form is designed to collect Maryland income tax withholding from nonresident sellers of Maryland real property at the time of sale or transfer.
For sales after June 30, 2025, Maryland guidance lists the withholding rate as 8.75% for nonresident individuals, estates, and trusts, and 8.25% for nonresident entities.
Example: if a nonresident individual seller has a $100,000 taxable payment subject to withholding, the withholding amount could be about $8,750 before any approved exemption or adjustment.
This is not the same as transfer tax or recordation tax. It is income tax withholding connected with a nonresident seller.
What Is Maryland Nonresident Seller Withholding?
Maryland nonresident seller withholding is a tax withholding requirement that may apply when a nonresident seller transfers Maryland real property.
In plain English, Maryland wants to make sure income tax connected with the Maryland property sale or transfer is collected even when the seller lives outside Maryland.
This is why the issue appears at deed recording or settlement instead of waiting until the seller files a later tax return.
What Is Form MW506NRS?
Form MW506NRS stands for Maryland Return of Income Tax Withholding for Nonresident Sale of Real Property.
The form reports the property transfer, the nonresident seller, the payment or consideration, and the amount of Maryland income tax withholding due.
It is not the deed. It is a tax withholding form that may need to accompany the recording package when a nonresident transferor is involved.
Who Needs to Worry About This?
This issue may matter when the transferor or seller is not a Maryland resident.
It can apply to:
- nonresident individuals
- nonresident estates
- nonresident trusts
- nonresident corporations
- nonresident limited liability companies
- other nonresident business entities
If every transferor is a Maryland resident or Maryland resident entity, this withholding issue may not apply, but residency should be documented properly.
How Much Is Withheld?
Maryland’s current nonresident seller withholding rates depend on the type of seller.
- 8.75% for nonresident individuals, estates, and trusts
- 8.25% for nonresident entities
The withholding is generally calculated from the payment, consideration, or amount subject to Maryland withholding rules.
The actual amount can depend on the transaction details, seller type, exemption certificates, and Maryland Comptroller rules.
How Is This Different From Transfer Tax?
This is an important distinction.
Maryland transfer tax and recordation tax are deed recording taxes. Nonresident seller withholding is Maryland income tax withholding.
In plain English:
- Transfer tax is tied to transferring the property.
- Recordation tax is tied to recording the document.
- Nonresident withholding is tied to collecting Maryland income tax from a nonresident seller.
A deed transfer may involve more than one of these at the same time.
Official Maryland Forms and Sources
The Maryland Comptroller provides the official withholding forms and instructions.
Can a Nonresident Seller Apply for an Exemption?
Yes. Maryland provides Form MW506AE, which is an application for a certificate of full or partial exemption from nonresident withholding.
This may be relevant when the seller believes the required withholding is too high, the gain is lower than the withholding calculation suggests, or another exemption or adjustment applies.
The exemption or reduced withholding certificate should be handled before recording or settlement whenever possible.
Important:
Do not assume that being a nonresident automatically means the full withholding amount is final. But also do not assume withholding can be ignored without an approved exemption or proper documentation.
What Gets Filed With the Clerk?
Maryland Form MW506NRS instructions say the form is filed with the Clerk of the Circuit Court with payment attached.
The form has multiple copies, including copies for the Comptroller, Clerk of the Court, seller, and issuer.
When a nonresident seller is involved, the recording package may not be accepted unless withholding requirements are properly handled.
Common Maryland Nonresident Withholding Mistakes
- Confusing nonresident withholding with transfer tax
- Forgetting to check whether the transferor is a Maryland resident
- Assuming a quitclaim deed avoids withholding
- Using the wrong withholding rate
- Failing to prepare Form MW506NRS when required
- Failing to apply for an exemption or reduced withholding certificate in time
- Assuming every family transfer is exempt
- Submitting the deed package before withholding is resolved
- Failing to coordinate with the settlement agent, clerk, or tax professional when needed
How This Fits Into the Maryland Quitclaim Deed Process
When preparing a Maryland quitclaim deed, check whether the transferor is a Maryland resident before recording.
If a nonresident transferor is involved, Form MW506NRS, withholding payment, or an approved exemption certificate may be needed in addition to the deed, intake sheet, transfer taxes, and recording fees.
Return to the main Maryland Quitclaim Deed Instructions page for the complete step-by-step guide.
Maryland Nonresident Seller Withholding FAQ
What is Maryland Form MW506NRS?
Form MW506NRS is the Maryland Return of Income Tax Withholding for Nonresident Sale of Real Property.
Who may need to file Form MW506NRS?
The form may be needed when a nonresident individual, estate, trust, or entity transfers Maryland real property.
How much is Maryland nonresident withholding?
For sales after June 30, 2025, Maryland guidance lists 8.75% for nonresident individuals, estates, and trusts, and 8.25% for nonresident entities.
Can withholding be reduced or avoided?
Sometimes. A nonresident seller may apply for a full or partial exemption using Maryland Form MW506AE when the seller qualifies.
Is this legal advice?
No. This page provides general educational information and is not legal advice.