How to Complete and File Maryland Form MW506AE: Deadline and Exemptions

Maryland Form MW506AE is the application a nonresident seller files with the Comptroller of Maryland to reduce or eliminate the income tax withheld at settlement when selling real property in the state. To use it, the Comptroller must receive your completed form and supporting documents at least 21 days before your closing date. If approved, you receive a Certificate of Full or Partial Exemption (Form MW506E) that the settlement agent presents at recording in place of the standard withholding.

Do You Actually Need to File MW506AE

Several situations skip the withholding without any application to the Comptroller. Your settlement agent handles these at closing through certification or documentation on the deed itself:¹

Each seller certifies under penalty of perjury, in the deed or a recorded affidavit, that they are a Maryland resident or resident entity.
Each seller certifies, again by deed or recorded affidavit, that the property is their principal residence.
The transfer results from foreclosure on a mortgage, deed of trust, or other lien, or is a deed given in lieu of foreclosure.
The property is transferred by the United States, Maryland, or a Maryland political subdivision.
The deed’s statement of consideration shows a payable amount of zero.

If your situation fits one of these, no MW506AE is needed. File MW506AE when none of the self-executing exemptions apply but you still believe you shouldn’t owe the full withholding, or when a principal-residence seller wants the Comptroller to calculate the actual tax owed rather than rely on self-certification.

Exemption Categories the Certificate Covers

The Comptroller can issue a full or partial exemption for a defined list of transactions. Identify your category before you start the form:²

Principal residence, formal certificate route (including active-duty military and certain government employees).
Like-kind exchange under IRC § 1031.
Installment sale under IRC § 453, with withholding limited to payments received before, at, or within 60 days of settlement.
Transfer between spouses or incident to divorce under IRC § 1041.
Zero or negative gain, where sale price minus adjusted basis and selling expenses is zero or a loss.
Transfer to a controlled corporation under IRC § 351.
Tax-free reorganization under IRC § 361.
Tax-exempt entity under IRC § 501(a), where the transfer involves no unrelated business taxable income.
Partnership contributions or distributions under IRC § 721 or § 731.
REIT transfer under IRC § 857.
Condemnation and conversion under IRC § 1033.
S corporation distribution under IRC § 1368.
Inherited property transferred within one year of the date of death.
Seller receiving zero proceeds because all proceeds go to another owner (such as a cosigner).
Seller is the custodian of an individual retirement account.
Tax already paid in full to the Comptroller.

On the 2026 form, these appear as checkboxes on pages two through five, with an addendum for the less common IRC-specific categories.³

Filling Out the Form

Download the current version of MW506AE from the Comptroller of Maryland’s website. Before you start, gather:

Full legal name, mailing address, and Social Security number, ITIN, or FEIN for each seller applying.
Property description: street address, county, district, subdistrict, and lot numbers if no address is available.
Expected sale price, original purchase price, documented capital improvements, selling expenses, and the anticipated closing date.
The exemption checkbox that fits your transaction.

The calculation section walks through gain or loss. Enter the sale price, your adjusted basis (original cost plus improvements), and selling expenses. If the gain line comes out zero or negative, enter zero as the tentative withholding amount. For a partial exemption, multiply the taxable gain by the withholding rate printed in the form’s instructions to get the reduced amount you’re asking the Comptroller to authorize.³

Every seller on the deed generally needs their own MW506AE or must be accounted for on the application. Sign and date the form. The signature is a declaration under penalty of perjury that the information is true, correct, and complete. Add a phone number and email so the Revenue Administration Division can reach you quickly if anything needs clarification.³

Supporting Documentation

The regulations require “sufficient documentation to support the request” without publishing a rigid checklist.² Attach whatever proves your category:

Zero-gain claim: your original settlement statement showing the purchase price, receipts for capital improvements, and a draft of the current closing disclosure.
1031 exchange: the exchange agreement with your qualified intermediary.
Divorce-related transfer: the relevant pages of the divorce decree or separation agreement.

The tighter the match between your documents and the numbers on the form, the less likely follow-up questions eat into your 21-day window.

Where to Send It and the 21-Day Deadline

Use one submission method. Don’t send the same application by both.³

By mail:

Comptroller of Maryland
Revenue Administration Division
Attn: NRS Exemption Requests
P.O. Box 2031
Annapolis, MD 21404-2031

By email: nrshelp@marylandtaxes.gov. Split large attachments across multiple smaller emails. The Comptroller’s instructions note that email does not speed up processing.

Either way, the Comptroller must receive the application at least 21 days before your closing date.² If you’re mailing, count backward from settlement and add days for postal delivery. Miss the deadline and the withholding happens whether you qualify for an exemption or not.

After You File

Approval produces a Certificate of Full or Partial Exemption, Form MW506E. A full exemption means zero withholding. A partial exemption states the exact reduced figure the clerk must collect at recording instead of the standard percentage.⁴

Give the MW506E to your settlement agent, who includes it with the deed package sent to the clerk of the circuit court. Without the certificate in hand at closing, the agent has no authority to reduce or waive withholding and must collect the full statutory amount.

One point that catches sellers off guard: the Comptroller’s decision to grant or deny the certificate is final and cannot be appealed.² If denied, full withholding applies at closing. You can still recover any excess by filing a Maryland nonresident income tax return for the year of the sale and claiming the withholding as a credit, but that money comes back only after next tax season.

Two Categories That Can Unravel: 1031 Exchanges and Installment Sales

For a like-kind exchange, the Comptroller issues the certificate based on your stated intent to complete a qualifying exchange. If the exchange fails, the replacement property doesn’t close in time, the transaction doesn’t meet § 1031 requirements, or you receive taxable boot, the withholding obligation snaps back onto the full payment or the boot amount despite the certificate.²

For installment sales, withholding applies to whatever portion of the total payment you receive before settlement, at settlement, or within 60 days after. Payments received later escape withholding at recording, but you still owe Maryland income tax on those payments when you file for the year you receive them.

FIRPTA Is Separate

If you’re a foreign person rather than a U.S. citizen or resident alien, Maryland’s withholding is not your only concern. The federal Foreign Investment in Real Property Tax Act requires the buyer to withhold 15 percent of the amount realized and remit it to the IRS.⁵ FIRPTA and Maryland withholding go to different taxing authorities and require different forms. A Maryland MW506E certificate does not reduce or eliminate the federal withholding.

Why Maryland Withholds in the First Place

Maryland law blocks the recording of a deed transferring property from a nonresident individual or entity unless a withholding payment accompanies it. The amount is a percentage of the total payment to the seller, not just the profit. For nonresident individuals, the rate equals the top marginal state income tax rate plus the special nonresident tax rate; for nonresident entities, it equals the state corporate income tax rate. Current figures appear in the MW506AE instructions each year.¹ The money goes to the clerk of the circuit court at recording and functions as a prepayment against whatever Maryland income tax you ultimately owe on the sale. If withholding exceeds your actual tax, you claim the difference as a refund on your Maryland return.

1
Maryland General Assembly. Maryland Tax-General Article 10-912
2
Library of Maryland Regulations. COMAR 03.04.12.04 – Certificate of Full or Partial Exemption
3
Comptroller of Maryland. 2026 Maryland Form MW506AE – Application for Certificate of Full or Partial Exemption
4
Library of Maryland Regulations. COMAR 03.04.12.03 – Withholding Requirements
5
Internal Revenue Service. FIRPTA Withholding