How to Fill Out and Submit Maryland Form 502CG: Capital Gains

Maryland Form 502CG calculates the additional 2% tax on net capital gain income owed by filers whose federal adjusted gross income exceeds $350,000, and it attaches to your Maryland Form 502 or Form 505.¹ The 2025 tax year, filed in 2026, is the first year the form applies. You use it to list your net capital gain, subtract six categories of gains the statute excepts from the surtax, and carry the remainder to Line 20a of Form 502 or Line 31a of Form 505.²

Who Has to File the Form

Two conditions have to be true. Your federal adjusted gross income must exceed $350,000, and you must have reported net capital gain on Line 7 of your federal Form 1040. The $350,000 threshold is the same for single, married filing jointly, and head of household filers.³ If your AGI is $350,000 or less, or you have no net capital gain in your Maryland AGI, skip the form entirely.¹

Capital gains passed through to you count. If you received a Maryland Schedule K-1 (510/511) from a pass-through entity or a K-1 (504) from a fiduciary showing capital gain distributions, those amounts feed into the form too.³

What You Need Before You Start

Finish your federal return first. You will pull numbers from several federal forms:

Federal Schedule D (Form 1040) for your overall net capital gain.⁴
Form 8949 for the individual sales that feed Schedule D.⁵
Form 4797 if you sold business property or livestock, so the capital gain portion is separated from ordinary gain and depreciation recapture.
Form 6252 if you had installment sale gains, and Form 8824 for like-kind exchange gains on business property.
All Maryland Schedules K-1 (510/511) and K-1 (504) you received, totaled before you complete Line 1a.

You also need your Form 1040 showing Line 7 and your federal AGI. Download a blank 502CG from the Comptroller’s website or use tax software that includes it.

Working Through the Form

Enter your name and Social Security number exactly as they appear on your Form 502 or 505. Mismatched identifying information can trigger delays and adjustment notices, because the Comptroller cross-references your figures against IRS data.¹

Line 1. Total federal net capital gain included in your Maryland AGI. Residents take this from Line 1c of Form 502. Nonresidents use Line 7, Column 2 of Form 505.

Line 1a. The total net capital gain from your Maryland K-1s. Residents use Section H, Line 1, Column 1. Nonresidents use Section H, Line 1, Column 2. Attach every K-1 to the return.

Lines 2 through 7. One line for each of the six exception categories. Enter only the amounts that match each specific exception; details below.

Line 8. Add Lines 2 through 7. That’s your total excepted capital gain.

Line 9. Subtract Line 8 from Line 1. This is the net capital gain subject to the 2% surtax. Copy it to Line 20a of Form 502 or Line 31a of Form 505. If the result is zero or negative, enter zero. You still attach the form.¹

The Six Excepted Categories

These are the gains that come out on Lines 2 through 7. Anything that does not fit one of them stays on Line 9 and is taxed at the extra 2%. Common non-excepted gains include stock sales, sales of vacation homes, and primary residence sales priced at $1,500,000 or more.⁶

Line 2 — Primary residence. Gain from selling your primary residence is excepted only if the sale price was under $1,500,000 and the property is a single-family home, townhouse, row home, residential condo, or residential co-op unit. Vacation homes and investment properties do not qualify. If a beneficiary owns the residence through a grantor trust, the trust’s sale counts as the beneficiary’s sale for the IRC § 121 two-year ownership requirement. The $1,500,000 cutoff is the sale price, not the gain, and it is a cliff: at $1,500,000 or above, none of the gain qualifies.¹

Line 3 — Retirement account assets. Gains inside 401(k) plans, 403(b) tax-sheltered annuities, 457(b) deferred compensation plans, traditional IRAs, Roth IRAs, defined contribution plans, defined benefit plans, and similar retirement savings plans.⁶

Line 4 — Livestock. Gains from cattle, horses, or breeding livestock held more than 12 months, reported on Form 4797. This exception only applies if more than 50% of your gross income for the tax year came from farming or ranching. Otherwise, leave the line blank.⁷

Line 5 — Conservation and preservation land. Gain from Form 8949 on the sale of land already subject to, or that will become subject to, a conservation, agricultural, or forest preservation easement. Do not duplicate anything you already entered on Line 2.

Line 6 — Trade or business property. Gains from Forms 4797, 8824, or 6252 on property whose cost was deductible under IRC § 179. Do not include ordinary gain or recaptured depreciation from Parts 2 and 4 of Form 4797.¹

Line 7 — Affordable housing. Gain from the sale of affordable housing owned by a nonprofit organization.

Filing and Where to Send It

Attach Form 502CG to your annual Maryland income tax return.¹ For the 2025 tax year, the deadline is April 15, 2026.⁸ You can e-file through Maryland’s iFile system or through commercial tax software.⁹

Paper returns with a payment go to:

Comptroller of Maryland
Payment Processing
PO Box 8888
Annapolis, MD 21401-8888

Paper returns without a payment go to:

Comptroller of Maryland
Revenue Administration Division
110 Carroll Street
Annapolis, MD 21411-0001¹⁰

Paper processing generally takes about 30 days. E-filed returns with direct deposit for refunds are typically faster.

Errors That Cost You Money

Two mistakes matter most, and they cut in opposite directions.

Overpaying: leaving excepted gains on Line 9. If you sold your primary residence for $1,200,000 and also sold stock, the home sale gain belongs on Line 2 and gets subtracted. Only the stock gain should survive to Line 9. Dumping everything on Line 9 means you pay 2% you don’t owe.

Underpaying: claiming an exception you don’t qualify for. A beach house or rental is not a primary residence, however often you use it. Livestock gains qualify only when farming or ranching produced more than half your gross income that year. If the Comptroller reclassifies the gain, expect an adjustment and interest on the underpayment.¹

And check that Line 2 sale-price cliff carefully. A residence that sold for $1,500,000 exactly is not eligible; the entire gain stays on Line 9.

Records to Keep

Hold onto everything that supports a number on the form: federal Schedule D, Form 8949, any Form 4797, all Maryland K-1s, and closing or settlement statements for real estate sales. For stocks and investment property, keep purchase-price records and acquisition dates. For a claimed primary residence, keep proof it actually was your primary residence.

Maryland can generally review returns for up to three years after filing. Retain your supporting records for at least that long, longer if you reported a loss on worthless securities or omitted income, because the lookback period extends in those situations.

1
Maryland Comptroller. Maryland Form 502CG – Capital Gain Income
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Maryland Comptroller. Maryland Form 502 Resident Income Tax Return
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Maryland Comptroller. Tax Updates from the 2025 Legislative Session – Webinar Slides
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Internal Revenue Service. About Schedule D (Form 1040), Capital Gains and Losses
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Internal Revenue Service. About Form 8949, Sales and other Dispositions of Capital Assets
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Maryland General Assembly. Maryland Code Tax-General 10-105
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Maryland Comptroller. Technical Bulletin 58 – Maryland Taxation of Individual Capital Gain Income
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Comptroller of Maryland. What’s New for the 2026 Tax Filing Season (2025 Tax Year)
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Comptroller of Maryland. Maryland Taxes Online Services – iFile Choose Form
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Comptroller of Maryland. Individual Tax Forms and Instructions