What Do I Need to Know About Taxes When Selling My Home in Southern Maryland?

If you’re thinking about selling your home in Southern Maryland, there’s a good chance you’ve asked yourself some version of this: “Okay, but what happens with taxes when I sell? Am I going to get hit with a huge bill?”

I hear this all the time from sellers in St. Mary’s, Calvert, and Charles Counties—right after we talk pricing and net proceeds. You want to know what you actually walk away with, not just the pretty number on the offer.

I’m Amanda Holmes, your local Southern Maryland agent, and I spend a lot of time helping sellers understand how taxes fit into the bigger picture of their sale. I’m not a CPA, but I can walk you through the key things you should be aware of so you’re not surprised at the closing table—or next April.

1. Capital gains tax: will you owe it?

When you sell your Southern Maryland home for more than you paid (plus improvements and certain selling costs), that profit is called a capital gain.

At the federallevel, many homeowners can exclude a significant amount of gain if the home was their primary residence for at least two of the last five years. The exact numbers and rules can change, so this is where I always suggest a quick check‑in with a tax professional.

Maryland taxes capital gains as ordinary income, so your gain (after any federal exclusion) gets added to your taxable income and is subject to Maryland state and local income tax. County rates vary, so a seller in Charles County may pay a slightly different combined rate than a seller in St. Mary's or Calvert.

One newer wrinkle worth knowing: beginning with the 2025 tax year, Maryland added a 2% surtax on net capital gains for taxpayers whose federal adjusted gross income exceeds $350,000. The good news for most home sellers is that gain from the sale of a principal residence is excluded from that surtax as long as the sale price is under $1.5 million. If you're selling a higher-priced home, or you have a large income year for other reasons, this is worth raising with your tax professional early.

Where I come in as your Southern Maryland agent is helping you estimate your potential gain—what you paid, what you’ve put into the home, and what your likely sales price could be—so you can bring those numbers to your tax pro for a clear picture.

2. Maryland transfer and recordation taxes: who usually pays?

In Maryland, most home sales involve transfer tax and recordation tax when the deed (and mortgage, if applicable) is recorded. There’s a state transfer tax, a county transfer tax, and a recordation tax that also varies by county.

Here's where a lot of sellers are given the wrong impression. Maryland law's default is an even split: unless your contract says otherwise, transfer and recordation taxes are shared equally between buyer and seller. It is not a seller-pays-it-all situation by default.

There is one important exception. When the buyer is a first-time Maryland homebuyer, the seller pays the entire state transfer tax — and in that case the state rate is cut in half, from 0.5% to 0.25%, and that cost cannot be shifted back to the buyer by contract.

Everything beyond that default is negotiable, and it does move with the market. In Southern Maryland, I see these costs split down the middle, shifted toward one side as a concession, or structured differently depending on price point, type of financing, and how competitive things are in places like Waldorf, California, or Prince Frederick. It's also worth knowing that county transfer and recordation rates differ across our three counties — Calvert, for example, has no county transfer tax at all.

When I walk you through your estimated net sheet, I’ll include these line items so you can see how transfer and recordation taxes impact what you actually net at closing—not just the contract price.

3. Property taxes at closing: prorations and what you still owe

Property taxes don’t just disappear when you list your home. At closing, taxes are prorated between you and the buyer based on the closing date. That means you’re responsible for your share of the year up to settlement, and the buyer takes over from there.

Because tax rates vary slightly between St. Mary’s, Calvert, and Charles Counties, your exact numbers will depend on where your home is and your current assessed value. If your taxes are paid through an escrow account with your mortgage, your lender will typically refund any remaining escrow balance to you after payoff—something I flag for sellers who are trying to estimate their cash in hand.

This is one of those areas where having a local agent and a solid title company makes things feel much less mysterious; we’re used to explaining those proration lines that make eyes glaze over on settlement statements.

4. Out‑of‑state sellers and Maryland withholding

If you’re selling a Southern Maryland property but you’re no longer a Maryland resident—for example, maybe you were stationed at Pax River and then moved out of state—Maryland often requires tax withholding at closing on the sale of real property.

This withholding is essentially a prepayment toward any Maryland income tax you may owe on the sale. For sales settling after June 30, 2025, the rate is 8.75% for nonresident individuals and 8.25% for nonresident entities, and it's calculated on the total payment to the seller — not on your profit. That surprises people, because a seller with modest gain can still see a sizable chunk held back at the table.

If you believe you'll owe less than the withheld amount — or nothing at all — you can apply for a Certificate of Full or Partial Exemption using Form MW506AE. That application has to be filed with the Comptroller well ahead of settlement, so this is not a last-week item. One more change to be aware of: for sales at $1.5 million or more, the option to apply for a tentative refund after closing is no longer available, which makes filing the exemption request in advance even more important.

I always urge out‑of‑state sellers in St. Mary’s, Calvert, and Charles Counties to coordinate early with both a title company and a tax professional so we can get the correct forms in place well before closing.

5. Improvements, selling costs, and reducing your taxable gain

One of the most common questions I get is: “Can I write off all this money I put into the house?” The answer is: sometimes, and not everything.

Generally, capital improvements that add value or extend the life of the property—like a new roof, finished basement, major kitchen remodel, or adding a deck—can increase your cost basis and reduce your taxable gain. Routine repairs and maintenance (like lawn care or basic touch‑up painting) usually don’t.

Selling costs can also reduce your gain. The IRS specifically names real estate commissions, advertising fees, legal fees, and any loan charges you pay on the buyer's behalf as costs you can subtract. Staging is a gray area — it isn't on the IRS's list, so don't assume it counts. Bring the receipt to your tax professional and let them make the call rather than penciling it in yourself.

When we prep your Southern Maryland home for the market, I encourage you to keep records of major improvements and hold onto your settlement statement so your tax professional can calculate your gain accurately.

6. Local nuance: Southern Maryland specifics that actually matter

Taxes are numbers on paper, but the details of your situation in Southern Maryland make those numbers play out differently. For example:

- A long‑time owner in a highly appreciated area of Charles County who commuted to D.C. may be closer to bumping into federal exclusion limits than a more recent buyer in a rural part of St. Mary’s.

- Waterfront homes in Calvert County may have seen different appreciation patterns than some inland communities, which changes potential capital gains exposure.

- Military and government employees near bases like Pax River or commuting to D.C. often have unique timing considerations, relocation packages, or multi‑state tax questions that affect when it makes sense to sell.

-Active-duty sellers have a break most people don't know about: if you're on qualified extended duty, you can suspend the five-year lookback for the primary-residence exclusion for up to 10 years. That means a Pax River family that PCS'd out three years ago may still qualify for the exclusion on a home they haven't lived in since — a real advantage when the timing of a sale isn't fully in your control.

My job as your local Southern Maryland agent is to help you see how these tax pieces connect to your pricing strategy, timing, and net proceeds—so you’re not just selling your house, you’re planning your next step with eyes wide open.

People also ask

1. Do I always have to pay capital gains tax when I sell my house in Maryland?

Not always. Many homeowners qualify for a federal home sale exclusion — up to $250,000 of gain if you're single, or $500,000 if you're married filing jointly — when the property was your primary residence for at least two of the last five years. Maryland then treats any remaining gain as ordinary income. Since the 2025 tax year, Maryland also applies a 2% surtax on net capital gains when federal AGI tops $350,000, though gain on a principal residence selling for under $1.5 million is excluded from it. What you actually owe depends on your total income, your cost basis, and how long you've owned the home, so it's smart to run the numbers with a tax professional.

2. Who pays transfer and recordation taxes when selling a house in Southern Maryland?

Under Maryland law, transfer and recordation taxes are split equally between buyer and seller unless the contract says otherwise — an even split is the starting point, not a seller obligation. The one exception: if your buyer is a first-time Maryland homebuyer, the seller pays the full state transfer tax, and the state rate drops from 0.5% to 0.25% in that situation. County rates vary across St. Mary's, Calvert, and Charles, and Calvert has no county transfer tax at all. Beyond the default, who pays what is negotiable and often becomes part of the offer terms. Your contract will spell it out, and I make sure you see those numbers on your net sheet before you accept anything.

3. How do property taxes work at closing when I sell my home?

At closing, property taxes are prorated between you and the buyer based on the settlement date. If you’ve already paid taxes beyond the closing date, you may be credited back; if you’re behind, an amount is usually collected from your proceeds. If your mortgage includes an escrow account, your lender typically refunds any remaining escrow balance after the loan is paid off.

4. I moved out of Maryland—will the state withhold taxes when I sell my old home?

Yes, in most cases. For settlements after June 30, 2025, Maryland withholds 8.75% for nonresident individuals and 8.25% for nonresident entities, applied to the total payment to the seller rather than to your profit. You can request a full or partial exemption with Form MW506AE if your actual Maryland tax liability will be lower, but that has to be filed with the Comptroller before settlement — and for sales at $1.5 million or more, the after-the-fact tentative refund option is no longer available. Start this conversation with your tax advisor and title company as soon as you decide

5. Should I talk to a tax professional before I list my Southern Maryland home?

Yes. As your agent, I can help you estimate net proceeds, explain local customs for taxes and fees, and connect the dots between your goals and the market in St. Mary’s, Calvert, and Charles Counties. A tax professional can then take those numbers and apply federal and Maryland rules to give you clear, personalized advice. The combination of both usually leads to better decisions about timing, pricing, and what you do with your equity next.

Ready to talk through your numbers?

If you’re thinking about selling in Southern Maryland—whether you’re in St. Mary’s, Calvert, or Charles County—or anywhere else in Maryland or Virginia, I’d be happy to walk you through what your sale could look like. I’m Amanda Holmes, and my goal is to help you understand not just what your home can sell for, but what you can actually walk away with after taxes and closing costs.

If you want to understand the full selling timeline before you commit to anything, my Southern Maryland seller's guide walks through every stage in plain language.

When you’re ready, reach out and we’ll go over your situation, your property, and your next steps—so your move feels planned, not stressful.