09/23/2026
No, there is no official "exit tax" in Maryland. The state does not charge a fee or penalty simply for moving your residence out of Maryland.
The phrase "Maryland Exit Tax" is a persistent real estate myth. What people are referring to is actually the Maryland Nonresident Real Estate Withholding Tax.
Here is why the rumor exists and how the actual law works:
Myth vs. Reality:
The Myth: If you move out of Maryland, the state takes a percentage of your proceeds as a penalty for leaving.
The Reality: Maryland requires settlement agents to hold estimated income tax upfront when an out-of-state resident sells Maryland real estate. It is a tax withholding mechanism (similar to taxes taken out of a paycheck), not an additional tax.
Does it apply to you?
Maryland Residents: If you live in Maryland and the property is your primary residence at the time of closing, this does not apply to you. You sign a standard Residency Affidavit at settlement, and zero state tax is withheld from your proceeds.
Nonresidents / Out-of-State Sellers: If you already moved out of state before closing, or if you live elsewhere and are selling a Maryland vacation home or rental property, the title company must withhold state income tax at closing.
Rates & Exemption Rules:
Current Withholding Rates: 8.75% of net proceeds for individual sellers; 8.25% for business entities (LLCs, corporations).
It is Refundable: Because this is an advance deposit toward your annual Maryland income tax return, any amount withheld that exceeds what you actually owe in capital gains tax is refunded to you when you file.
Avoiding/Reducing the Hold: If you qualify for federal primary residence exclusions (owned/lived in the home for 2 of the last 5 years), are selling at a loss, or are doing a 1031 exchange, you can submit Form MW506AE to the Comptroller. If submitted at least 21 days before closing, the state can issue a certificate to reduce or completely eliminate the withholding at the closing table.
