How to Complete and Submit Maryland Form MW506NRS: Payment and Reductions

Maryland Form MW506NRS is the withholding return the closing agent files with the Clerk of the Circuit Court whenever a nonresident sells real property in Maryland. It goes in at recording along with a check for the withholding: 8% of the total payment for individual, estate, or trust sellers, and 8.25% for business entities.¹ Without both the form and the payment, the clerk will not record the deed.

Who Files It and Who Pays

The obligation sits with the person responsible for closing the transaction, usually the settlement agent or title company. A separate MW506NRS is prepared for each nonresident seller in the deal, though spouses filing a joint Maryland return can be reported on a single form. The seller, the seller’s agent, or the real estate reporting person can sign it.²

A seller is a nonresident individual if Maryland is not their principal residence. A business entity is nonresident if it was not formed under Maryland law and is not qualified or registered with the State Department of Assessments and Taxation to do business in Maryland. Tax-General Section 10-912 is what stops the clerk from recording the deed unless the withholding accompanies it.³

What the Withholding Is Calculated On

The single biggest error on this form is running the rate against the gross sales price. The rate applies to the total payment, which is the sales price minus the mortgages and liens being paid off, the sales commission, and other expenses the seller owes in connection with the sale.³ Non-cash consideration, such as another property received as part of the deal, is included at its fair market value.

A quick illustration: on a $400,000 sale with a $280,000 mortgage payoff and $24,000 in commissions and closing costs, the total payment is $96,000. Withholding at 8% is $7,680, not $32,000.

Completing Form MW506NRS Line by Line

Pull the current year’s form from the Comptroller of Maryland’s website. It has three working areas: property, seller, and computation.¹

Property and Transfer Information

Line 1 is the property’s street address as it appears in SDAT records, plus the SDAT property account ID. Rural or unaddressed parcels use the descriptive identification SDAT uses. If the sale involves multiple parcels with separate account numbers, list them all.

Line 2 is the date of transfer, meaning the effective date of the deed under Real Property Article Section 3-201 (the later of the last acknowledgment or the date stated in the deed). Line 3 has a checkbox for sellers reporting the gain on the installment method.

Seller Information

Line 4 is the seller’s tax identification number or Social Security number, with a spouse’s SSN added if both are on a joint return. Line 5 is the seller’s name. Line 6 is the seller’s mailing address, not the property address. Line 7 asks whether the seller is an individual, estate, trust, or business entity, and that choice sets the rate downstream.

Computation

Lines 8a–8d: start with the total sales price (including the fair market value of any non-cash consideration), then subtract mortgage and lien payoffs, the real estate commission, and other seller expenses tied to the sale.
Line 8e: the result is the total payment.
Line 8f: this seller’s ownership percentage when there are multiple owners.
Line 8g: Line 8e multiplied by Line 8f, giving this seller’s share of the total payment.
Line 8h: 8.25% for a business entity; 8% for an individual, estate, or trust.
Line 8i: Line 8g times Line 8h. That is the withholding amount.

If the Comptroller issued a Certificate of Partial Exemption (Form MW506E), skip 8a through 8h and enter the amount from Line 3 of that certificate directly on Line 8i.

Submitting the Form and the Payment

The closing agent presents the completed MW506NRS and the withholding payment to the Clerk of the Circuit Court for the county (or Baltimore City) where the deed is being recorded. The payment is by check or money order payable to the Clerk of the Circuit Court. Both must arrive together with the deed, or the deed does not get recorded.

When the transfer is filed with the State Department of Assessments and Taxation rather than recorded with a clerk, the form and payment go to SDAT instead.³

The form has three copies. Copy A stays with the clerk or SDAT. Copy B goes to the seller. Copy C stays in the closing file; do not send it in with the seller’s Maryland return. The seller should keep everything, along with the settlement statement, to reconcile at tax time.

When Withholding Can Be Reduced or Avoided

Not every nonresident sale actually funds withholding. Some exemptions can be claimed at recording; others need a certificate from the Comptroller in advance.

Claimed at closing, no pre-approval:⁴

The seller certifies under penalty of perjury, in the deed or an attached affidavit, that they are a Maryland resident or resident entity.
The seller certifies under penalty of perjury that the property is their principal residence.
The transfer is a foreclosure of a mortgage, deed of trust, or other lien, or a deed in lieu of foreclosure.
The seller is a federal agency or instrumentality, the State of Maryland, a state unit, or a political subdivision.
The deed’s statement of consideration shows the amount payable is zero.

Requires a certificate from the Comptroller (Form MW506AE, filed at least 21 days before closing; applications without a closing date are not processed):⁵

Principal residence for at least two of the last five years under IRC Section 121, with prior Maryland resident returns filed for that period (the Comptroller verifies).
Same principal-residence test for sellers whose move was ordered by the government or who are stationed in Maryland; include transfer orders and proof of residency.
1031 like-kind exchange, with a letter from the qualified intermediary identifying the seller, the property, and any boot.
Installment sale under IRC Section 453.
Inherited property transferred within one year of the date of death.
The seller is the custodian of an IRA.
The seller receives nothing because all proceeds go to another owner, such as a cosigner.
Transfers under IRC Sections 351, 361, 501(a), 721, 731, 857, 1033, 1041, or 1368.

Send the MW506AE to the Comptroller of Maryland, Revenue Administration Division, Attn: NRS Exemption Requests, P.O. Box 2031, Annapolis, MD 21404-2031, or email it to nrshelp@marylandtaxes.gov. Use one method, not both.

Reconciling on the Maryland Nonresident Return

The amount withheld through MW506NRS is a prepayment, not the final tax. The seller files a Maryland Nonresident Income Tax Return (Form 505) along with Form 505NR to compute the actual Maryland tax on the gain from the sale.⁶ The returns are due during the regular tax filing season for the year the sale closed.

Because the 8% or 8.25% ran against the total payment rather than the net capital gain, sellers with modest gains or high basis are often overwithheld and get a refund. Sellers whose gain is large relative to the total payment can end up owing more, and pay the balance with the return. Payments and returns go to the Comptroller of Maryland, Payment Processing, PO Box 8888, Annapolis, MD 21401-8888.

One boundary worth flagging: foreign persons for federal tax purposes may also owe FIRPTA withholding on the same sale, collected through IRS Form 8288. The Maryland payment does not satisfy that federal obligation, and the federal payment does not satisfy Maryland’s.⁷

1
Comptroller of Maryland. 2025 Form MW506NRS Maryland Return of Income Tax Withholding for Nonresident Sale of Real Property
2
Code of Maryland Regulations. COMAR 03.04.12.05 – Responsibilities of Transferee and Real Estate Reporting Person
3
Maryland General Assembly. Maryland Code Tax-General 10-912 – Payments Required on Sale of Property by Nonresidents
4
Cornell Law Institute. COMAR 03.04.12.03 – Withholding Requirements
5
Comptroller of Maryland. 2026 Maryland Form MW506AE Application for Certificate of Full or Partial Exemption
6
Comptroller of Maryland. Individual Tax Forms and Instructions
7
Internal Revenue Service. About Form 8288-B, Application for Withholding Certificate for Dispositions by Foreign Persons of U.S. Real Property Interests