Tuesday, May 29, 2012

Is Your Seller a Maryland Resident?

Is  Your Seller a Maryland Resident?

Being wonderfully busy with new listings, this question needs to be addressed. Is Your Seller a Maryland Resident?
                                         
   Tax Alert-- Change in Maryland Withholding Tax
                                     

Effective June 1, 2012, the Maryland tax rate applicable to withholding on a sale or transfer of real property by a non resident of the state, will increase 7%
Since I am not an attorney or an accountant, I let a professional, like  Jeff Margolies , answer in the form of this newsletter. 

Newsletter 
Effective June 1, 2012, the Maryland tax rate applicable to withholding on a sale or transfer of real property by a nonresident individual will increase, as follows:

 Ø      Nonresident Individuals -  7.00 percent  
 Ø      Nonresident Entities  - 8.25 percent  (remains the same) 

Some of you have asked me what constitutes a Resident.   Below is the most common question that I have been receiving, and my answer: 
Question:  I have customers that recently moved from Maryland and currently live out-of- state.  They are selling their former home.  Since they no longer live in the State of Maryland, do they have to pay withholding taxes?
Answer:  Certain transfers are exempt from the payment of Maryland withholding taxes.  One of them is the sale of a principal residence.  The Office of the Comptroller regulations define principal residence as described in the Internal Revenue Code (26 U.S.C. §121) and listed as a principal residence with the State of Maryland.  According to the IRS, if the real estate was used as the seller(s) primary residence for at least two years (2) during the five year (5) period ending with the date of the sale, then the gain from the sale is exempt from being included in gross income.  Currently that amount is $250,000.00 for individuals and $500,000.00 for married couples filing a joint return.

According to MD TAX-GENERAL Code Ann. § 10-912, in order to obtain the exemption in Maryland, the transferor(s) must sign a certification under penalties of perjury that the property being transferred is their principal residence.  The certification must be recorded together with the instrument transferring the property. 

§ 10-912 (d)  Exceptions.- Subsection (c) of this section does not apply when: 

 (5) a certification under penalties of perjury that the property being transferred is the transferor's principal residence is provided by each transferor in:  

 (i) the recitals or the acknowledgment of the deed or other instrument of writing transferring the property to the transferee; or  

 (ii) an affidavit signed by the transferor or by an agent of the transferor that accompanies and is recorded with the deed or other instrument of writing transferring the property; 


At Supreme Title Company, this is accomplished by having the sellers sign the form entitled “Certificate of Exemption from Withholding-MD”, which is then recorded with the Deed.


Please remember…

Each tax situation is unique.  Since Supreme Title Company cannot give legal or tax advice, customers should consult with a tax professional before moving forward. 
For more information regarding withholding see the Comptroller of Maryland’s page at: http://individuals.marylandtaxes.com.  

Jeffrey E. Margolies, Esq.

Is Your Seller a Maryland Resident?
Being wonderfully busy with new listings, this question needs to be addressed. Is Your Seller a Maryland Resident?

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