StructuredSales.org
StructuredSales.org
A Maryland sale is never just a state return. The Comptroller's brackets now reach 6.5%. Every county adds its own income tax, and in 2026 those rates run from 2.25% to 3.30%, with two counties on a graduated scale. Then, if federal adjusted gross income is over $350,000, a 2% surtax applies to net capital gain. The same building in Worcester County and in Montgomery County is not the same bill. A primary home sold for under $1.5 million is not the same bill as the rental next door.
The surtax is a cliff, not a slice. Cross $350,000 of federal adjusted gross income and the 2% reaches the net capital gain included in Maryland income, not merely the dollars above the line. A structured installment sale under IRC §453 can keep a year at or under that line. It does not repeal the state brackets or the county tax. This page shows the difference on one Montgomery County rental. It is an illustration, not your return.
The Comptroller's withholding facts for January through December 2026 print two schedules. Joint filers, heads of household, and qualifying surviving spouses pay 4.75% through $150,000 of taxable net income, then 5%, 5.25%, 5.5%, and 5.75%, then 6.25% from $600,001 through $1,200,000, and 6.5% above $1,200,000. Single filers, married filing separately, and dependents reach 6.25% at $500,001 and 6.5% above $1,000,000. The bottom of both schedules is still the old narrow steps: 2%, 3%, and 4% on the first $3,000. Capital gain is in taxable income. There is no lower long-term rate underneath the surtax.
Local tax sits on Maryland taxable income. The Department of Legislative Services lists calendar-year 2026 rates. Worcester is 2.25%. Talbot is 2.40%. Garrett is 2.65%. Cecil is 2.74%. Montgomery, Prince George's, Baltimore City, Baltimore County, and Howard are 3.20%. Dorchester and Kent are 3.30%. Anne Arundel and Frederick use graduated local rates, so one percentage is the wrong model there. A flat county rate produces the same county tax on a given gain whether you recognize it in one year or in eight, if the rate does not change. The surtax is the piece that changes with the year.
Technical Bulletin 58, effective December 29, 2025, explains the tax the General Assembly added for taxable years beginning after 2024. If federal adjusted gross income is over $350,000, the state income tax is the regular tax plus 2% of net capital gain included in Maryland adjusted gross income. The $350,000 test is the same for a single filer and a joint filer. Spouses do not each get $350,000. Fiduciaries with federal taxable income over $350,000 can owe it on undistributed gain. Pass-through entities do not pay the 2% themselves. They report capital gain to the members, and the member owes it if the member's federal adjusted gross income is over the line.
The bulletin's exceptions are specific. A primary residence is out only when it is a single-family home, townhome, row home, residential condominium, or cooperative, and it sold for less than $1,500,000. A beach house is not the primary residence, so the price does not matter. Retirement accounts are out. Cattle, horses, and breeding livestock held more than twelve months can be out when more than half of gross income that year, counting asset sales, is from farming or ranching. Land under a conservation, agricultural, or forest preservation easement, or land that will be under one at the sale, is out. The Comptroller's 2025 legislative materials also describe exceptions for property expensed under §179 and for certain nonprofit affordable housing. Read TB-58 against the closing statement before you drop the 2% from a model.
Federal layers remain. For 2026, joint long-term rates are 15% until taxable income passes $613,700 and 20% above that. The 3.8% net investment income tax uses a $250,000 threshold on a joint return and reaches only the excess over that line. Maryland's 2%, once federal adjusted gross income is over $350,000, reaches the net capital gain.
Maryland taxes nonresidents on Maryland-source gain, including real property. Installment payments generally stay Maryland income as they are recognized under §453, which Maryland follows because Maryland adjusted gross income starts from federal adjusted gross income. A move to Florida does not erase a Silver Spring rental's later payments.
Collection is faster than recognition. The deed usually cannot be recorded unless withholding comes with it. A Comptroller tax alert dated April 13, 2026, says that for sales after June 30, 2025, individual nonresident withholding is 8.75%, the lowest county rate plus the highest marginal state rate. Entity withholding remains 8.25%. If the sales price is $1.5 million or more, the seller is not eligible for a tentative refund and files the annual return, with Form 502CG if the surtax applies. Withholding is computed on the payment at recording. Installment gain may be recognized over years. A Maryland preparer has to match the withholding credit to the gain on this year's return.
Owners who also hold property in the District should read the District guide. An LLC that owns a D.C. building can owe the District's franchise tax even when the members live in Bethesda. Eastern Shore farmland under an easement may skip the 2% and still sit in the state brackets and the county tax. Our farmland guide is the federal side of that sale.
A joint filer in Montgomery County has $220,000 of federal adjusted gross income before the sale, and this sketch sets Maryland taxable income equal to that figure. Exemptions and deductions are ignored, so both columns are high. The asset is a rental. Long-term gain is $900,000. They compare one year with eight slices of $112,500. Lump-sum federal adjusted gross income is $1,120,000, so the 2% applies to the whole $900,000. Each installment year is $332,500, so the surtax is zero. County tax is 3.20%. Federal figures use 2026 joint long-term brackets and the 3.8% net investment income tax. Recapture and payment interest are omitted. The installment balance is under $5 million.
| Lump sum | Eight installments | |
|---|---|---|
| Federal AGI in the recognition year | $1,120,000 | $332,500 |
| Maryland state tax on the gain | $54,138 | $50,050 |
| Montgomery County tax on the gain | $28,800 | $28,800 |
| 2% capital-gains surtax | $18,000 | $0 |
| Federal long-term capital gain tax | $160,315 | $135,000 |
| Federal 3.8% net investment income tax | $33,060 | $25,080 |
| Combined tax on the gain | $294,313 | $238,930 |
The county column does not move. The state brackets move by about $4,100 because the lump sum reaches 6.25% and the installment years stay in the 5.75% joint bracket. The surtax is the clean $18,000. Federal tax supplies the rest. The combined illustration is about $55,400 lower. A bonus year that pushes adjusted gross income over $350,000 turns the 2% back on for that year's entire gain. Ordinary recapture on a rental is due in the year of sale. The tired-landlord guide and the real-estate guide cover that ordering. A primary home sold for $1.4 million may skip the surtax and still face §121 limits, discussed in home sales over $500,000.
This sketch equates Maryland taxable income with federal adjusted gross income, which overstates tax. The surtax result is the point: over $350,000, the 2% hits the gain; at or under it, the 2% does not. Estimates, not a savings promise.
Name the county, the federal adjusted gross income you already have, and whether the asset is on TB-58's exception list. If you are a nonresident, ask how withholding at the deed will be credited against gain you will recognize later. If a pass-through sells the property, remember the entity does not pay the 2%, and you might. The installment assignment has to be in the contract before you are paid. Section 453 does not reopen after the wire.
If your federal adjusted gross income is over $350,000, Maryland adds 2% of the net capital gain included in Maryland adjusted gross income. The threshold is the same for every filing status. It is not doubled for a joint return. Once you are over the line, the 2% applies to the net capital gain, not only to the dollars above $350,000. Technical Bulletin 58 states that rule. The regular state brackets apply either way.
Technical Bulletin 58 excludes several categories. A primary residence qualifies only if it is a single-family home, townhome, row home, residential condominium, or residential cooperative, and it sold for less than $1,500,000. Retirement-account assets are out. So are certain cattle, horses, and breeding livestock when more than half of gross income is from farming, and land that is, or will be, under a conservation, agricultural, or forest preservation easement. The bulletin lists further exceptions. Read it before you treat a gain as excluded. A rental and a second home are not the primary-residence exception.
The Comptroller's 2026 withholding facts and the Department of Legislative Services list local income tax rates from 2.25% in Worcester County to 3.30% in Dorchester and Kent counties. Montgomery, Prince George's, Baltimore City, Baltimore County, and Howard are 3.20%. Anne Arundel and Frederick use graduated local rates, so a single percentage is the wrong model there. The county tax is on Maryland taxable income. A flat county rate does not change just because you spread the gain.
Maryland taxes nonresidents on Maryland-source income, including gain from Maryland real property. Installment gain is generally taxed as it is recognized. Separately, the deed generally cannot be recorded unless withholding is paid. For sales after June 30, 2025, the individual withholding rate is 8.75% of the payment to the nonresident. Entity withholding stays 8.25%. If the price is $1.5 million or more, the seller cannot use the tentative-refund process and must wait for the annual return. Withholding at recording and section 453 recognition are not the same calendar. Match them with a Maryland preparer.
Yes, if each year's federal adjusted gross income, including the gain recognized that year, does not exceed $350,000. A year that misses by a small amount can pull the entire net capital gain for that year into the 2%. The state brackets and the county tax still apply to the taxable income. Staying under the cliff avoids the surtax. It does not avoid the rest.
Last reviewed: October 22, 2026.
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