Form MW506AE is the application that nonresident individuals and entities file with the Comptroller of Maryland to request a Certificate of Full or Partial Exemption from withholding on the proceeds of selling real property, or associated personal property, in Maryland. Each seller completes a tentative exemption worksheet, names any special situation that applies and attaches the documents the instructions require. On FillingPDF you can fill out the form online and download or print the completed PDF; the Comptroller must receive it no later than 21 days before the closing date, through the channels described below.
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What is MW506AE?
Form MW506AE, Application for Certificate of Full or Partial Exemption, is the Comptroller of Maryland form that nonresident individuals and nonresident entities use to ask for a full or partial exemption from the withholding requirement on the proceeds of selling Maryland real property and associated personal property.
The instructions define a nonresident entity as one that is not formed under Maryland law and is not qualified by or registered with the Department of Assessments and Taxation (SDAT) to do business in Maryland.
The form works in two parts. Page 1 holds the seller's information, the property information and a worksheet, lines 1 through 10, that computes a tentative withholding amount from the purchase price or inherited value, capital improvements, settlement expenses, depreciation and the contract sales price. Page 2 lists the Special Situations, such as a principal residence, a §1031 tax-free exchange or a transfer of inherited property within 6 months of the date of death, and collects the settlement agent's mailing details and the signatures. An addendum lists transfers under specific Internal Revenue Code sections and the documents each one needs.
The tentative amount is not final. The Comptroller recalculates it from the documents actually received and the amounts substantiated, and its decision to issue or deny a certificate, and the amount, is final and not subject to appeal. Sellers using a relocation company also complete the MW506AE – Relo Addendum.
Who needs to file MW506AE?
An individual, fiduciary, C corporation, S corporation, limited liability company or partnership that is a nonresident transferor/seller of Maryland real property or associated personal property may file Form MW506AE to seek a full or partial exemption from withholding.
- One form per seller. Each transferor/seller needs a separate form, unless the sellers are spouses filing a joint Maryland income tax return.
- Co-owners. Enter your own ownership percentage; for four equal owners, the instructions say to enter 25% on a single application.
- Rental or commercial property. Maryland law requires nonresident owners to file a nonresident income tax return reporting rental income or loss. If you check the rental/commercial box and did not file those returns, your application will be denied, so file them first.
- Relocation sales. If you sell through a relocation company, complete and attach the MW506AE – Relo Addendum.
- Representatives. The form must be signed by an individual (both spouses if filing a joint Maryland return) or by a responsible corporate officer. If a power of attorney is needed, complete Maryland Form 548 and attach it.
The form is for sellers; the settlement agent named on page 2 receives the certificate if one is issued.
When to file MW506AE
The Comptroller must receive the completed Form MW506AE and all required documentation no later than 21 days before the closing date of the sale or transfer, to ensure timely receipt of a Certificate of Full or Partial Exemption. The form itself repeats this deadline at the top of page 1.
The date of closing is required. An application with no closing date, or with the date left blank, will not be processed.
If a preliminary settlement statement is not available when you file, the instructions say to forward it as soon as it is completed so the settlement costs are credited. If you do not know the settlement agent when you complete the form, email the agent's name and address to [email protected] as soon as possible to avoid delay in recording the sale. If you are claiming rental or commercial use, file all required nonresident income tax returns before you file this application.
Documents you need
- Line 1: original settlement statement, property tax printout (available at www.dat.state.md.us), original contract, date of death appraisal, or other proof of the original purchase price or inherited value.
- Line 2, only if you claim capital improvements: paid invoices or receipts with cancelled checks, showing proof of payment, the property address and the work completed.
- Line 3: a settlement statement for the settlement costs claimed; if the sale's preliminary settlement statement is not yet available, forward it as soon as it is completed.
- Line 5, for rental or commercial property: a depreciation schedule or the income tax returns showing depreciation already taken.
- Line 7: the current contract (page 1 and signature pages only) or a preliminary settlement statement.
- Principal Residence – Active-duty Military, Certain Government Employees: transfer orders and proof of residency, such as a federal return with a Maryland address, utility bills or property tax statements.
- Tax-Free Exchange under §1031: a letter signed by the qualified intermediary (or an authorized signer for a business entity) stating the transferor names, the property, the intermediary's role, and whether there is boot and its amount. Proof of payment if withholding was paid out-of-pocket.
- Zero proceeds to the seller: a copy of the seller's letter to the title company about who receives the proceeds, and the title company's acknowledgment letter.
- Installment sale under §453: the contract of sale or settlement sheet, and a copy of the promissory note to be executed by the transferee at settlement.
- Inherited property transferred within 6 months of the date of death: a copy of the death certificate and a copy of the estimated settlement sheet from the title company.
- Seller is an IRA custodian: the preliminary settlement sheet, the custodian's Certificate of Good Standing from its state of incorporation, and a title company letter that all proceeds go to the custodian.
- Transfer under a specific Internal Revenue Code section: the documents listed for that code letter (a through i) in the addendum, such as agreements, Certificates of Good Standing, appraisals or notarized affidavits.
- Relocation company sale: the completed MW506AE – Relo Addendum.
- Maryland Form 548, only if a power of attorney is necessary.
How to fill out MW506AE
Enter seller identification
Enter the Social Security number (or ITIN, if the IRS issued one) and name of the transferor/seller, plus the spouse's details if filing jointly. An entity enters its name and Federal Employer Identification Number, then the present address.
Mark entity type and ownership
Check the Transferor/Seller's Entity Type: Individual/Estate/Trust or Business. Enter your ownership percentage; with four equal owners, enter 25% on a single application.
Describe the property
Enter the street address as listed with SDAT, including county. If there is no street address, give the full SDAT property account ID numbers, all of them if there are several parcels.
Answer the rental question and closing date
Check Yes or No for rental or commercial use and, if Yes, enter the dates in mm/dd/yyyy. Enter the date of closing; it is required.
Complete lines 1 through 3
Line 1: original purchase price or date of death value. Line 2: optional capital improvements. Line 3: settlement expenses from the original purchase (3a) and the pending sale (3b), added together.
Figure the adjusted basis
Line 4: add lines 1 through 3. Line 5: depreciation already taken for rental or commercial property. Line 6: subtract line 5 from line 4.
Enter sale price and taxable amount
Line 7: contract sales price. Line 8a: subtract line 6 from line 7. Line 8b: multiply line 8a by your ownership percentage (1.00, .50, .333, etc.).
Select the tax rate and withholding
On line 9, check the box for Individual or Business. On line 10, multiply line 8b by the rate; enter zero if the result is zero or less, which may qualify you for a full exemption subject to verification.
Check any special situation
On page 2, enter the seller's name and Social Security number/FEIN and check the one Special Situations box that applies, if any. If you check the specific Internal Revenue Code box, use the addendum letter for your transfer.
Add the settlement agent's details
Enter the contact person, company, street address, telephone, fax and email of the settlement agent to whom the certificate should be mailed. If unknown, email the details to [email protected].
Sign, date and add preparer details
Sign and date; the spouse also signs if filing a joint Maryland return. A paid preparer adds the PTIN, signature, printed name, address and telephone. Include a daytime phone number, and check the email box only if you authorize contact by email.
Review and download the completed PDF
Check that the closing date and every line match your documents, then download or print the completed PDF from FillingPDF. Assemble the attachments and submit through one of the channels described under How to submit.
How to submit MW506AE
You can submit Form MW506AE by mail or by email, but the instructions say to use only one method.
- By mail: send the completed form and all attachments to Comptroller of Maryland, Revenue Administration Division, Attn: NRS Exemption Requests, P.O. Box 2031, Annapolis, MD 21404-2031.
- By email: send the completed form and all attachments to [email protected]. Email does not speed up processing. If your attachments are large, send several smaller emails.
Name the title company or settlement agent on page 2, with a mailing address, because that is where the certificate is mailed if it is issued. The certificate is not emailed to you, even if you check the box that allows the Comptroller to contact you by email about missing information.
Include a daytime telephone number where you can be reached between 8:00 AM and 5:00 PM. For questions, visit www.marylandtaxes.gov, email [email protected], or call 1-800-MDTAXES (1-800-638-2937) or 410-260-7980 in Central Maryland.
FillingPDF lets you fill out and download the PDF; submission follows the Comptroller's channels above.
Common mistakes to avoid
- Letting the Comptroller receive the application fewer than 21 days before the closing date.
- Leaving the date of closing blank; an application with no closing date will not be processed.
- Checking the rental/commercial box without having filed the nonresident income tax returns reporting that income or loss, which results in denial.
- Including settlement costs or other adjustments on line 1, which is only the original contract purchase price (or date of death value for inherited property).
- Claiming capital improvements on line 2 without paid invoices or receipts and cancelled checks; they will not be credited.
- Filing one form for several sellers who are not spouses filing a joint Maryland return; each seller needs a separate form.
- Submitting by both mail and email; the instructions allow only one method.
- Omitting a mailing address for the settlement agent, which can delay recording of the sale.
- Entering a negative result on line 10 instead of zero.
- Leaving out the MW506AE – Relo Addendum when selling through a relocation company.
Frequently asked questions
What is Form MW506AE used for?
Form MW506AE is the Comptroller of Maryland application for a Certificate of Full or Partial Exemption from the withholding requirement on the sale of Maryland real property and associated personal property by nonresident individuals and nonresident entities.
When is the MW506AE due?
The Comptroller must receive the completed form and all required documentation no later than 21 days before the closing date. An application with no closing date will not be processed, so the date of closing must be filled in.
Where do I send Form MW506AE?
Mail it to Comptroller of Maryland, Revenue Administration Division, Attn: NRS Exemption Requests, P.O. Box 2031, Annapolis, MD 21404-2031, or email it to [email protected]. Use only one method; email does not speed up processing.
Do co-owners each need their own MW506AE?
Yes, each transferor/seller needs a separate form, unless the sellers are spouses filing a joint Maryland income tax return. Each co-owner enters his or her own ownership percentage, such as 25% for one of four equal owners.
What if my line 10 withholding amount is zero?
If line 10 is zero or less, enter zero. The instructions say you may then qualify for a full exemption, subject to verification. The Comptroller recalculates the amount from the documents actually received and the amounts substantiated.
Can I appeal if the Comptroller denies the certificate?
No. The form and instructions state that the Comptroller's decision to issue or deny a certificate, and the amount of tax to be withheld on a partial exemption, is final and not subject to appeal.
What happens if I owned the property as a rental and did not file returns?
Your application will be denied. Maryland law requires nonresident owners of Maryland real property to file a nonresident income tax return reporting rental income or loss, so file all appropriate returns before filing Form MW506AE.
Is the capital improvements line required?
No, line 2 is optional. However, improvements will not be credited unless you attach paid invoices or receipts with cancelled checks showing proof of payment, the property address and the work completed.
Can I fill out Form MW506AE online on FillingPDF?
Yes, you can fill out the PDF online on FillingPDF and download or print it. FillingPDF is an independent service and does not file the form with the Comptroller; you submit it by mail or email as the instructions describe.
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