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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15037
Experience:  15years with H & R Block. Divisional leader, Instructor
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I lived in Maryland and paid Maryland taxes through tax year

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I lived in Maryland and paid Maryland taxes through tax year 2012. In 2009, I inherited a home and took full possession (deed) in 2011. We never lived in the inherited home as we owned our own home. The inherited property was rented from 2010 until late 2012. We sold our home in June 2011 in anticipation of a move to North Carolina. We moved permanently to North Carolina in December 2013 and will be paying NC State taxes for tax year 2013. The MD inherited home is under contract to be sold and we anticipate going to closing within the next 30 days. Are we eligible for the waiver as a Non-resident selling real estate? Because of the existing mortgage, etc, we are well below the $250K exemption on capital gains.

Robin D :

Hello and thank you for using Just Answer,
First, the mortgage will not have a play in your gain or loss on the sale. You will calculate your gain/loss using the difference in basis and sale price. Your basis will be the fair market value at date of death when you inherited. You will pay tax (federal and MD) on any gain from the sale of the MD property.

Robin D :

If you sale the property while you are a NC resident you will pay tax in NC too on the gain.

Robin D :

The system showed you were typing

Robin D :

Did you want to ask for clarification?

Customer:

Hmm - not exactly my question - do I have to pay the 7% Maryland tax - I have no capital gains tax because the difference between the fair market value and the sales price is almost zero

Robin D :

If you do not have a gain on the sale then you will not pay tax.

Robin D :

They may withhold on the sale because you are a non resident. You would file and receive a refund as a non resident.

Customer:

just to be clear - this is the tax I am referring to:


Maryland Non-Resident Transfer Withholding Tax


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What is it?


It is a withholding levied by the State of Maryland to facilitate the payment of capital gains income taxes by non-residents who sell real property located in Maryland.


When does it take effect?


For any settlements occurring October 1, 2003 or thereafter. The withholding rate set forth below took effect June 1, 2012.


How much tax is withheld?



  • Individuals (effective 6/1/12): 7% of the total payment from the sale


Robin D :

Yes, that is required but, you can request to not have the withholding if you identify the property as having no gain.

Robin D :

At closing the withholding would apply so I believe you have 21 days(?) to show no gain is anticipated.

Robin D :

I will have to look that up time frame up, one sec please

Robin D :

To request the certificate issued by the Comptroller, a nonresident or nonresident entity may file an Application
for a Certificate of Full or Partial Exemption (MW506AE) with the Comptroller no later than 21 days before
the date of closing. This 21-day time period is required to permit the Comptroller to review the application and,
if appropriate, issue a certificate before the date of closing. If an application is received within 21 days from the
date of closing, the Comptroller cannot guarantee that a certificate will be issued before the date of closing.

Customer:

otherwise, I will have to file in 2013 to get the money back, right?

Robin D :

Correct

Robin D :

The filing of the non resident return would show no gain thus refund of the amount withheld woudl be refunded.

Robin D :

If you have 30 days till sale you would have just enough time.

Robin D :

Maryland also advises that they also have an application for a tentative refund (MW506R) that may be filed 60 days
after settlement, and applies to all closing that occur on or before November 1st of the year in which the
property was sold. This application is an opportunity to recoup some of those funds back a little early,
prior to the mandatory income tax return filing requirement at the end of the year.

Robin D :

Just in case you miss the filing for exemption from withholding.

Robin D :

Did you need any more information on the sale?

Customer:

Thank you for clearing that up!

Robin D. and other Tax Specialists are ready to help you