Do I Have to Pay Taxes When I Sell My House in Maryland?

Selling your home can bring financial rewards, but it can also raise important questions about taxes. Maryland homeowners often wonder, “Will I have to pay taxes when selling my house?” The answer depends on several factors, including how long you’ve lived in your home, your profit from the sale, and your specific situation. This guide clearly explains the key taxes you might face and how to minimize or even avoid them entirely.

Understanding Capital Gains Tax When Selling Your Maryland Home

What is Capital Gains Tax in Maryland?

Capital gains tax is the tax you owe on the profit from selling your home. Your profit—or capital gain—is the difference between the amount you paid for your home (plus any improvements you’ve made) and the price you sell it for.

Short-Term vs. Long-Term Capital Gains

Short-Term Capital Gains:
If you owned your home for less than one year, your profit is considered short-term and is taxed as ordinary income, typically at a higher rate.

Long-Term Capital Gains:
If you owned your home for over one year, you’ll likely benefit from lower tax rates, ranging from 0% to 20%, based on your income level.

Federal Capital Gains Tax Rates for 2025

Here is a simple breakdown of tax rates in 2025 on the Federal level:

0% Tax Rate: Single filers earning up to $47,025; married couples filing jointly earning up to $94,050.

15% Tax Rate: Single filers earning between $47,026–$518,900; married couples filing jointly earning between $94,051–$583,750.

20% Tax Rate: For income above the thresholds above.

Maryland State Capital Gains Tax

In Maryland, your capital gains are taxed as regular state income. Rates vary depending on your income level, with a maximum state tax rate of 5.75%. This is something to consider as you may be on the hook for both Federal and Maryland capital gains taxes when selling your house in Maryland.

How to Reduce or Eliminate Capital Gains Tax

Primary Residence Exclusion

One significant benefit for homeowners is the federal primary residence exclusion. Maryland follows federal guidelines, allowing homeowners to exclude:

• Up to $250,000 of capital gains if you’re single.
• Up to $500,000 if you’re married and filing jointly.

Eligibility Requirements:

• You must have owned and lived in your Maryland home as your main residence for at least two of the five years before the sale.

Example of Capital Gains Tax in Maryland:
If you bought your home for $200,000 and sold it for $450,000, you have a gain of $250,000. If you’re single and meet the requirements, you’ll owe no federal or state capital gains tax.

Keep Accurate Records on the Purchase of Your House in Maryland

To benefit from these exclusions, maintain detailed records of your home purchase price, costs of significant home improvements, and selling expenses.

Other Taxes You Might Face When Selling Your Maryland Home

Transfer Taxes in Maryland

When you sell your home, Maryland collects a transfer tax based on the sale price:

• State Transfer Tax: Typically 0.5% of the sale price.
• County Transfer Taxes: Vary by county, generally between 0%–1.5%.

Typically, buyers and sellers share these costs, though you can negotiate differently.

Recordation Taxes in Maryland

Maryland also has a recordation tax, usually about 0.69%, but varies by county. Like transfer taxes, buyers and sellers commonly share these expenses.

Withholding Taxes for Nonresidents in Maryland

If you sell Maryland property but don’t reside in the state, Maryland law requires withholding a portion of your proceeds—typically 7.5%—to ensure payment of any taxes owed.

Frequently Asked Questions (FAQs) for Maryland Homeowners

Q: Will I pay capital gains tax if I lose money selling my home?
A: No. If you sell your home for less than you paid, there is no gain, and thus no capital gains tax is due.

Q: Do I have to pay capital gains tax on inherited property?
A: Possibly, but typically gains are calculated based on the property’s value at the date you inherited it, not what the previous owner paid.

Q: Can I avoid paying taxes if I reinvest profits into a new home?
A: The old rule of rolling profits into another home no longer applies, but you can still benefit from the primary residence exclusion if you qualify.

Key Steps to Prepare for Taxes When Selling Your Home in Maryland

Consult a Tax Professional in Maryland
Before selling, talk to a Maryland tax professional to clearly understand your situation and potential liabilities.

Plan The Sale of Your Maryland House Carefully
If close to eligibility for the primary residence exclusion, timing your sale right could save thousands in taxes.

Keep Good Records on Your House in Mayland
Maintain clear documentation of all home improvements and expenses. These records directly reduce your taxable gain.

Ready to sell your Maryland home or need personalized advice?

Understanding taxes when selling your Maryland home helps you avoid surprises and keeps more money in your pocket. By planning ahead, consulting experts, and knowing your exemptions, you can confidently navigate your home sale without stress or unexpected bills.

We Buy MD Homes is here to help Maryland homeowners make informed choices. Reach out today and let’s discuss your home selling options clearly and honestly.