Updated October 7, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. Maryland’s Form 502 tells filers to “Copy the figure for federal adjusted gross income from Line” of the federal return, which leaves out a gain excluded under section 121. Gain above it is taxed at graduated rates. Maryland’s additional 2% tax on net capital gain at high incomes does not apply to gain on a primary residence (a single-family home, townhome, row home, condominium or cooperative unit) sold for less than $1,500,000. Nonresident sellers are withheld 8.75%.
Maryland tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Starts from federal adjusted gross income, which excludes a gain excluded under section 121; the nonresident form defines principal residence by section 121 |
| Rate on gain above the exclusion | Graduated: 2.00% to 6.50% (2025 schedules), plus an additional 2% on net capital gain when federal AGI exceeds $350,000, except gain on a primary residence sold for less than $1,500,000 |
| Collected at the sale | Nonresident sellers only: withholding at 8.75% of the gain for individuals (Form MW506AE), with an exemption certificate for a principal residence under section 121. The deed also carries a state transfer tax of 0.5% of the consideration |
| Source | Comptroller of Maryland |
What the Maryland documents say
The 2025 resident booklet tells filers to “Copy the figure for federal adjusted gross income from Line”. Under the federal statute, “Gross income shall not include gain from the sale or exchange” of a principal residence that meets the ownership and use tests, so an excluded gain never enters federal adjusted gross income. That is reasoning from two documents. The booklet prints no separate Maryland home-sale rule.
The Comptroller’s Technical Bulletin No. 58 says that until 2025 capital gains of individuals have been “taxed in Maryland in the same manner” and at the same rate as ordinary income. It then says the General Assembly “imposes an additional 2% tax on net capital gains included” in Maryland adjusted gross income for individuals with federal adjusted gross income above $350,000. Its list of exceptions starts with residential dwellings: the gain is not subject to the additional 2% tax if “the dwelling is the taxpayer’s primary residence”, it is a single-family home, townhome, row home, residential condominium unit or residential cooperative unit, and “the dwelling sold for less than $1,500,000”.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Maryland sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by Maryland. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000, which is taxed at the graduated rates, and the additional 2% tax does not apply if the home is a primary residence of a listed type sold for less than $1,500,000; this page computes no tax because the result depends on the rest of the return.
What is collected at the sale
Form MW506AE, the “Application for Certificate of Full or Partial Exemption” from nonresident withholding, prints the individual rate: “Individual 8.75% (.0875)”. The form lets a seller certify that the “Transfer is of your principal residence as defined in §121”. The form covers nonresident sellers, not Maryland residents.
Maryland also charges a state transfer tax on the deed. Tax-Property section 13-203 says “the rate of the transfer tax is 0.5% of the consideration payable for the instrument of writing”, and it sets a different rate for some first-time Maryland home buyers. County transfer and recordation taxes were not read.
What changes in 2026
The documents read for Maryland announce no change for 2026 that is specific to the tax on a home sale. The forms and instructions read are for tax year 2025 or the newest page archived; check the state agency for 2026 forms when they are published.
What the documents do not say
- The booklet does not mention section 121, so conformity for residents is reasoned from the federal starting point; the withholding form does define principal residence by section 121. County income taxes were not read. The schedules are for tax year 2025, the withholding form for 2026.
Common mistakes
- Treating the 8.75% MW506AE withholding as a rule for Maryland residents; the form covers nonresident sellers.
- Applying the additional 2% tax on net capital gain to a primary residence sold for less than $1,500,000; Technical Bulletin No. 58 excepts that gain.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Maryland taxes capital gains, Maryland retirement taxes, and home sale exclusion calculator.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for home sale proceeds
If your portfolio is $250,000 or more, this connects you (free, with no obligation to hire anyone) with 2 to 3 vetted advisors.
Before you start, what actually happens. The matching service is run by WiserAdvisor, an independent advisor-matching company. It opens on their site, asks for your ZIP code and a few questions, and matches you with 2 to 3 vetted advisors. It is free to you.
WiserAdvisor states the service is built for portfolios of $250,000 and above. By submitting, you consent to emails, phone calls and text messages from WiserAdvisor and up to three advisors, so expect to be contacted. Clear Money Guide may earn a referral payment for a qualifying completed form, whether or not you ever hire anyone.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your sale proceeds
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment through this service, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- 2025 State & Local Tax Forms & Instructions (Resident Booklet): https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/instructions/2025/resident-booklet.pdf
- Maryland Form MW506AE 2026, Application for Certificate of Full or Partial Exemption: https://www.marylandcomptroller.gov/content/dam/mdcomp/tax/forms/2026/mw506ae.pdf
- Technical Bulletin No. 58, Maryland Taxation of Individual Capital Gain Income: https://www.marylandcomptroller.gov/legal-library/tb-58-dec-29-2025.html
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
- Md. Code, Tax-Property section 13-203, Rate of transfer tax (Maryland General Assembly; read October 8, 2026): https://mgaleg.maryland.gov/2026RS/Statute_Web/gtp/13-203.pdf
Sources: the primary documents linked above, read on October 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.