Non-Resident Owners of Maryland Property - Transfer Tax (Withholding) Rate Increase

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Real Estate Broker/Owner with Sunset Properties - Maryland and Delaware Farm & Land Sales 503939

Maryland increased its Non-Resident real property transfer "withholding" tax, effective January 1, 2008, from 6% to 6.75 % for individuals and from 7 % to 8.25 % for corporations.  If you own real estate in Maryland but you are not a Maryland resident when you sell it you are subject to the withholding. In many  cases you can recover the withholding. It will require filing a Maryland "Non Resident" tax return (Form 505) and Form MW506NRS. Go to http://business.marylandtaxes.com/taxinfo/withholding/sale_property.asp for full details.

 

Posted by

Mickey Hayward, CRB, CRS, MD & DE Farms Homes and Land Sales
Sunset Properties, 110 Market Street,
Denton, Maryland 21629                                                                                                                                        Office Phone: (410) 479-9729 x 21, Cell Phone: (410) 924-2277                                                                           http://www.marylandanddelawarehomes.com

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Ambassador
915,864
Margaret Woda
Long & Foster Real Estate, Inc. - Crofton, MD
Maryland Real Estate & Military Relocation
These labels are counter-productive.  As a listing agent, we just need to take into account this withholding amount when estimating net proceeds and not editorialize about it.
Apr 02, 2008 02:31 PM #5
Ambassador
2,466,056
Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

Goodness.  Keep up the good work.  The withholding is onerous and the tax upon which it is based is onerous and the rest of the taxes that have gone through the roof since the last election are onerous.

 

Apr 03, 2008 12:25 PM #6
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales
Ms. Woda - I beg to differ.  What we need not do is criticize a fellow real estate professional for expressing an opinion.  That's the beauty of a free country and a free democratic society.  I simply stated an opinion about the tax system.  I prefer to give opinions and to speak out against out of control taxes at every opportunity.  I don't prefer to just sit by and become a Leming.  What you did is editorialize my blog, not make an intelligent comment about Maryland's very high tax structure.  I encourage everyone who pays taxes in Maryland to contact their representatives and complain.  I pay an enormous amount of taxes to the state of Maryland so I feel that gives me a right to speak out.  Don't "editorialize" my opinions.
Apr 03, 2008 12:25 PM #7
Anonymous
Anonymous

Hi Mickey,
Seems that the government (federal, state and local) are finding more and more ways to dip into our pockets. 

May 14, 2008 06:59 AM #8
Rainmaker
198,270
Mary Strang
Viroqua, WI
Real Estate

Seems punitive to tax non residents more than residents. A good way for someone not to want to own Maryland property, is that the design of the tax law? In Wisconsin there is a lotto credit, it was given only to residents and a class action law suit over turned it, giving the credit to all property owners.

May 14, 2008 07:04 AM #9
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Cynthia - In the past year, in Maryland, the government has become very creative in finding ways to dig into our pockets. Sales taxes even went up another 1 % in the past year. I'm actually a Delaware resident who got hit with the "non-resident" tax a while back. Luckily, it was not a big sale. On the other hand I recently had a seller from out of state sell a farm for $1,685,000 and he had to pay the "non-resdient" tax on that amount, in addition to the already high state and county transfer taxes. Whew!

May 14, 2008 03:33 PM #10
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Mary - I'm with you on this.  Is seems punitive to levy such a tax on "non-residents."  It seems that the tax laws may be designed to make out of state people not want to own property in Maryland. Hooray for the Wisconsin residents for sticking up for themselves. 

May 14, 2008 03:36 PM #11
Anonymous
Rob

My job is supposed to move from NJ to MD in a few years, and I had planned on keeping my NJ house to come back on the weekends (keep the primary resident status). In MD I may rent or even built a moderate investment house to live in during the work week. After I can retire from the job (which can be about 6 years after my job moves) I may return to NJ (or some say I may like MD and want to stay there). MD seems just as bad as NJ tax wise, but NJ gets you in different ways. NJ has a simlar withholding only if you are leaving the state (called the exit tax - something just recent also). Anyway, maybe Delaware (about a 30 mile commute to where my job will move) may be an option if I want to do have a house, but I wonder how my tax will play out with...NJ primary residence, MD work, and DE as my "bedroom" during the week. Maybe I should just rent or even live in a sleeze hotel and get the know the real Maryland before I plant any roots. Then there is the county tax collected on your AGI (percentages vary by county, some 3% of your AGI). I imagine I still have to pay this, but what if you don't live in MD? Hmm. Maybe DE is the answer. I hope I didn't hijack the thread because I went off topic a little.

Jul 18, 2008 04:50 PM #12
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Rob - I live in Delaware and work in Maryland.  At tax time I have always paid so much in Maryland taxes that I don't owe any Delaware taxes.  Delaware gives me credit for taxes paid to Maryland.  Delaware doesn't have a local tax like Maryland does and there is no state sales tax so from a tax standpoint I like it.

Jul 18, 2008 05:52 PM #13
Rainmaker
368,662
Kevin Robinson
Twin Falls, ID
High End Vacation Homes

Liberal politicians at work. It sounds as if the Maryland legislators are going to tap everyone they can get their hands on. Bad for business in the state though.

Jul 20, 2008 09:02 AM #14
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Kevin - I agree.  It doesn't help business.  The State of Maryland taxes pretty heavily but by far not as heavily as some of the other states.  Check out these stats, courtesy of The Tax Foundation: http://www.taxfoundation.org/news/show/335.html This kind of says it all. Combined State and Local Tax Burdens compared to other states puts Maryland at a rank of 23 (with 1 being the highest amount of tax burden) and Delaware at 47 nationwide.  Northeastern states hold six of the top 10 positions for most taxed states.  It will be interesting to check back here next year, after another big year of taxation in Maryland, to see where Maryland ranks for 2008. 

Jul 20, 2008 02:03 PM #15
Anonymous
Elsa Correa-DeLeonardo (Long and Foster - Reisterstown, MD)

I am working with sellers who have owned a property in Baltimore City for over 30 years. He was transferred. So they moved to West Virginia and rented the house to their daughter who eventually moved to Tennessee. Originally they were planning to retire in Maryland but now they want to go to Tennessee to be with their daughter and future grandchildren. Currently both are retired and are watching their retirement money investment diminish not only with the devaluation of their property, but by Maryland's greed. They are not happy but understand the former - tough timing, but the latter their furious with!!

Aug 01, 2008 09:45 AM #16
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Elsa - Isn't this really sad . . .

Aug 01, 2008 10:35 AM #17
Anonymous
Anonymous

It is not clear upon what portion of the proceeds that are taxed.  From the above comments, it would seem that it would only be upon the difference between the outstanding debt on the property and the sale price (or adjusted sales price after closing costs?).  What if the original price of the house plus improvements exceeds this amount and thus you would be taxed on some of your improvements (which you were already taxed on when they were made in terms of taxes on material and labor costs).

Aug 08, 2008 06:37 PM #18
Anonymous
Denice

I'm recently retired from the Air Force and have returned to MD after 22 years.  My family is here and I thought I would return to be closer; however, I have claimed Texas as my home of residence for the last 9 years. I bought a house but my sibling mentions I must change my state of residence.  I really do not wish to change my state of residence to MD I really want to keep it as Texas and on top of that I recently got engaged to my boyfriend whom is British and I will return to leave in the UK.  I wish to rent but once again as mentioned I do not wish to change my residency.  Would it be profitable to me to rent or should I just sale it and but all this MD tax problems behind me.

I knew there was a reason I did not want to claim MD as my home of residence.

Aug 24, 2009 10:10 PM #19
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Denice - Sorry I didn't reply to your post sooner.  Maryland has a website that you can go to and get the forms to figure out your Non Resident Withholding amount based on your particular property and situation.  Here's a link which may be of some help to you:

 http://business.marylandtaxes.com/taxinfo/withholding/sale_property.asp

I retired from the USAF too.  Let me know how you make out.  I'm thinking of moving to Texas myself.  It's a tax friendly state to veterans.

Sep 06, 2009 08:50 AM #20
Anonymous
Hayden C Jones

Mickey,

 

 I sold a property in OC, MD this past April and MD took capital gains taxes onthe gross amount, not the true capital gain.  As a result, I'm out a lot of money and I'd like to get some of it back before next year.  Is there any way to recover the excess taxes they took (they never even tried to calculate the true capital gain)?  Someone told me there might be a way to do it after waiting 60 days.

Any help will be appreciated.

Thanks

Hayden

 

Jun 30, 2010 02:54 PM #22
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Hi Hayden,

See post # 20 above for the info and the forms needed to get a potential refund.  Check it out.

 

Jun 30, 2010 03:44 PM #23
Anonymous
MD

Question: My parents are British Citizens who live in the UK. They own a property in MD and wish to sell. We've just learned of this 7.5% tax on non residents.

I've read about the appeal process and most indicate a refund can be given when a person files their taxes in the next year, however, my parents don't file taxes in the US and won't have an opportunity to regain their 7.5% tax on the property.

Q1: Is there a way to get an excemption before closing if they are non US Residents and have no tax return?

Q2: If they close, pay the tax, how can they obtian a refund if they don't file US taxes?

Q3: They purchased the property for 230k in 2007, now the value is 290k. Does the tax not apply at all?

Nov 17, 2010 03:35 PM #24
Rainmaker
159,318
Mickey Hayward
Sunset Properties - Maryland and Delaware Farm & Land Sales - Denton, MD
Farms, Homes, Agricultural and Hunting Land Sales

Regarding Post # 24, I refer you to post number 20 above for a link to info and forms needed to file a tax return in order to get a potential refund.  Given your parents' situation, I recommend that you or they contact the Maryland Comptroller's office. The tax is actually a "withholding" tax.  I think they can file a Maryland "Non-Resident" tax return just to claim the withholding. I am no tax expert so I recommend you contact the Comptroller's office for specific guidance. 

Nov 17, 2010 04:00 PM #26
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