We recently had a client come in whose surviving parent passed away. Our client, as Executor of the Estate, is in the process of selling the residential home. Another client came in a few days later, because she and her husband are moving out of the area.
What many people are not aware of, is a withholding tax on the proceeds of the sale of real property or associated personal property in Maryland by non-resident individuals and non-resident entities.
You may qualify for full or partial exemption from this tax, but you have to file the appropriate form. Form MD506AE permits exemptions for the following “special situations”:
- If you are transferring your principal residence (i.e. the property has been your principal residence for two of the last five years; or, if it was, but you had a move necessitated by government orders;
- You are making a tax-free §1031 exchange;
- The transferor or seller is receiving zero proceeds from the transaction;
- The transfer is an installment sale;
- The property is inherited property, and transferred within six months of the date of death;
- The transferor or seller is the custodian of an individual retirement account.
Unless the transferors, or sellers, are spouses filing a joint Maryland income tax return, a separate Form MW505AE is required for each person.
Make sure you file yours! The form must be received no later than 21 days before closing date.
Download the form here: http://forms.marylandtaxes.com/15_forms/MW506AE.pdf