Downsizing in Maryland (2026): Buy First or Sell First, Rent-Backs, Decluttering, Transfer Taxes and Capital Gains

If you want to buy before you sell, some lenders offer ways to use your current home's equity before it sells, such as a bridge loan or a home equity line of credit set up before you list. Terms, costs and availability vary by lender, and each adds debt and risk if your home takes longer to sell. Ask at least two lenders to explain the options, costs and what happens if the sale is delayed, and compare the written terms.

• Start early. Measure the new home and decide what furniture will fit before you start sorting.
• Sort by keep, give to family, sell, donate and discard. Let family members choose items first and set a deadline.
• For valuable items, consider a qualified appraiser before selling.
• If you hire an estate sale or liquidation company, get the fees and terms in writing, ask for references and confirm insurance.
• Shred old financial papers you no longer need and keep tax, deed and home improvement records, which matter for figuring your gain.
• Plan the move and the listing photos together, so the home shows well with fewer items.

Maryland charges a 0.5% state transfer tax, a county transfer tax in most counties, and a county recordation tax. By law the buyer and seller split them equally unless the contract says otherwise. If your buyer is a first-time Maryland homebuyer, the state transfer tax drops to 0.25% and the seller pays all of it, and the seller also pays the county taxes unless the contract expressly says otherwise. Ask for a net sheet that uses your county's actual rates. See our county guide for the rates.

IRS Publication 523 explains that if you meet the ownership and use tests, you can exclude up to $250,000 of gain from the sale of your main home, or $500,000 for a married couple filing jointly. Generally you must have owned the home and lived in it as your main home for at least 24 months of the 5 years before the sale. For a married couple filing jointly, only one spouse has to meet the ownership test, but each spouse must meet the residence test for the full $500,000. A surviving spouse who sells within 2 years of the spouse's death may still qualify for the higher exclusion if the conditions are met.

Gain above the exclusion, or gain on a rental or second home, is generally taxable. Your gain is based on your cost basis, which includes many improvements, so keep your records.

• 2% capital gains tax: since 2025, Maryland adds a 2% tax on net capital gains for individuals and fiduciaries with federal adjusted gross income over $350,000. Gain from selling your primary residence for less than $1,500,000 is excluded from this extra tax.
• Nonresident withholding: if you have moved out of Maryland before you sell, Maryland withholds 8.75% for nonresident individuals and 8.25% for nonresident entities at settlement, for sales after June 30, 2025. It is a prepayment, not the final tax.
• Exemptions: you may qualify for a full or partial exemption, for example with little or no gain or for certain principal residence sales, by filing Form MW506AE, which must be received at least 21 days before closing.
• Sales of $1,500,000 or more: nonresident sellers can no longer request a tentative refund and must file a complete return.
• Talk to a CPA before you list, especially if you are moving out of state or have a large gain.

Maryland's seller disclosure law does not apply to a transfer by a fiduciary in the course of administering a decedent's estate, guardianship, conservatorship or trust. A personal representative or trustee still needs the right legal authority to sign, so talk to a Maryland estate attorney early. The new owner does not inherit the Homestead Tax Credit, and property tax prorations at settlement follow the current bill.

This is general information, not legal or tax advice. Confirm tax questions with a CPA and legal questions with a Maryland attorney before you list or sign.