Maryland Capital Gains Tax on Real Estate: 2026 Rates + Step-by-Step Calculator

Part of: The Complete Guide to Selling a Home in Montgomery County, MD

Key Takeaways: Maryland does not have a separate capital gains tax — gains are taxed as ordinary income at the state rate of 2%–5.75%, plus a Montgomery County local rate of 3.2% (other counties 2.25%–3.2%). Federal long-term capital gains are taxed at 0%, 15%, or 20%, and short-term gains (assets held under 12 months) are taxed at your ordinary federal income rate. For a primary residence, the federal Section 121 exclusion of $250,000 single / $500,000 married wipes out most or all of the gain for typical Maryland sellers. The five-step calculator below handles the typical Montgomery County case end-to-end.

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This post is the calculator companion to Capital Gains Tax When Selling Your Home in Maryland — that post explains the Section 121 rules and exceptions; this one runs the numbers, end to end, at the rates that actually apply in 2026.

Disclaimer: I'm a REALTOR®, not a CPA. The math below is general guidance using publicly published 2026 rates (IRS Topic 409, Maryland Comptroller). For a tax decision tied to a specific sale, work with a CPA on your actual numbers.

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Does Maryland Have a Capital Gains Tax on Real Estate?

Maryland does not have a separate, standalone capital gains tax — but that doesn't mean gains escape state taxation. Maryland taxes capital gains (long-term and short-term, real estate and stocks) as ordinary income at the regular state income-tax brackets, with the county "piggyback" tax stacked on top.

That means the effective Maryland tax on a real-estate gain depends on your total Maryland taxable income in the year of sale — including the gain itself. A retiree with $50K of other income and a $200K taxable gain ends up in different state brackets than a dual-earner household at $400K base income.

For 2026, the structure looks like this:

| Component | Rate | Applies to | |---|---|---| | Federal long-term capital gains | 0% / 15% / 20% | Assets held > 12 months | | Federal short-term capital gains | 10%–37% (ordinary rates) | Assets held ≤ 12 months | | Net Investment Income Tax (NIIT) | 3.8% | Investment income above $200K single / $250K MFJ MAGI | | Maryland state income tax | 2%–5.75% | All capital gains as ordinary income | | Montgomery County local tax | 3.2% | Stacked on state taxable income | | Other MD counties | 2.25%–3.2% | Stacked on state taxable income |

The combined Maryland + Montgomery County top marginal rate on a large capital gain is therefore ~8.95% state-and-local, on top of the federal rate.

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Maryland Capital Gains Tax Rate 2026 (Step Through Brackets)

Maryland's individual income tax brackets for 2026 (single filer):

| Maryland taxable income | State rate | |---|---| | $0 – $1,000 | 2.00% | | $1,001 – $2,000 | 3.00% | | $2,001 – $3,000 | 4.00% | | $3,001 – $100,000 | 4.75% | | $100,001 – $125,000 | 5.00% | | $125,001 – $150,000 | 5.25% | | $150,001 – $250,000 | 5.50% | | $250,001+ | 5.75% |

(Married-filing-jointly brackets are roughly double through the lower tiers; full schedule at the Maryland Comptroller.)

For most Montgomery County sellers with a meaningful taxable gain, you'll be in the 5.50%–5.75% state bracket plus the 3.2% Montgomery County rate = 8.70%–8.95% Maryland-side. That's the effective rate to assume for back-of-envelope sizing of a large gain.

For smaller gains that don't push your total taxable income past $150K, the Maryland-side effective rate may be closer to 7.95% (4.75% state + 3.2% county).

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Long-Term vs Short-Term Capital Gains Tax in Maryland

Maryland treats both identically — they're both just ordinary income at the state level. But the federal treatment is dramatically different, and that's where most of the tax bill comes from.

Long-Term (held > 12 months — the typical primary-residence case)

Federal 2026 long-term capital gains brackets:

| Filing status | 0% rate | 15% rate | 20% rate | |---|---|---|---| | Single | $0 – $48,350 | $48,351 – $533,400 | $533,401+ | | Married filing jointly | $0 – $96,700 | $96,701 – $600,050 | $600,051+ | | Head of household | $0 – $64,750 | $64,751 – $566,700 | $566,701+ |

Most Montgomery County sellers land in the 15% federal bracket for a long-term capital gain. The 20% bracket only kicks in once your total taxable income (gain included) crosses the high-income threshold.

Short-Term (held ≤ 12 months — rare for residential, common for flips)

Short-term gains are taxed at your federal ordinary income tax rate (10%–37%) instead of the preferential capital-gains rate. For a typical Montgomery County dual-income household in the 24%–32% federal bracket, that means a short-term gain on a real-estate flip costs roughly 9–17 percentage points more federally than the same gain held one day longer.

Practical implication for flippers and investors: if you're within a few months of the 12-month mark on a Maryland investment property, the after-tax difference between selling now and waiting often runs into five figures. Run the math.

For a primary residence, this rarely matters — you almost certainly meet the Section 121 two-of-five-year ownership test long before the long-term/short-term question becomes relevant.

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Maryland Capital Gains Tax on Primary Residence

This is the single most-searched question, and the answer is the most generous in the U.S. tax code.

For your primary residence — the home where you've lived for at least 2 of the last 5 years — you can exclude:

• $250,000 of gain if single
• $500,000 of gain if married filing jointly

This is the federal IRS Section 121 exclusion. Maryland fully conforms to it: if the federal government doesn't tax the gain, Maryland doesn't either. No state or county tax on the excluded portion.

For most Montgomery County sellers — even those with $300K, $400K, or $500K of equity built up — this means a $0 capital gains tax bill on the sale.

The exclusion is lost only in specific situations:

• You exceeded $250K/$500K of gain (the excess is taxable)
• The home wasn't your primary residence for 2 of the last 5 years
• You've already used the exclusion within the prior 24 months
• The home was a rental during part of your ownership (depreciation recapture rules apply — see the sell-vs-rent analysis)

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The Five-Step Maryland Capital Gains Calculator

Run this for a primary-residence sale. Substitute your numbers.

Step 1: Calculate the Adjusted Sale Price

Adjusted sale price = Sale price − Selling costs

Typical Maryland selling costs (8–10% of sale price): real estate commission, Maryland transfer & recordation tax (seller's share), settlement fees, title fees, attorney fees, transfer-day pro-rations. For a full breakdown see the cost of selling a house in Maryland calculator.

Step 2: Calculate Your Adjusted Cost Basis

Adjusted cost basis = Original purchase price + Purchase closing costs + Capital improvements

Capital improvements (kitchens, baths, roofs, HVAC, additions, decks, windows, finished basements) add to your basis. Routine repairs do not. Keep receipts — the basis bump is often $40K–$100K on a 10-year-old home.

Step 3: Calculate the Gain

Gain = Adjusted sale price − Adjusted cost basis

Step 4: Apply the Section 121 Exclusion

Taxable gain = max(0, Gain − $250,000 single / $500,000 MFJ)

If taxable gain is $0, stop here. You owe no federal or Maryland capital gains tax. This is the outcome for the large majority of Montgomery County primary-residence sellers.

Step 5: Apply the Tax Rates to Any Remaining Taxable Gain

If there's a taxable gain remaining after the exclusion:

• Federal: apply the long-term bracket (most likely 15%)
• NIIT: add 3.8% if total MAGI exceeds $200K single / $250K MFJ
• Maryland state: apply your bracket (typically 5.50%–5.75% for sales of this size)
• Local county: add the local rate (Montgomery County: 3.2%)

Combined effective rate on a large taxable gain for a Montgomery County household: roughly 15% + 3.8% + 5.75% + 3.2% = 27.75%. For a household above the 20% federal bracket: 20% + 3.8% + 5.75% + 3.2% = 32.75%.

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Worked Example 1: Typical MoCo Sale, No Tax Owed

A married couple in Silver Spring sells a home they've lived in for 12 years.

• Sale price: $725,000
• Selling costs (~9%): $65,250
• Adjusted sale price: $659,750
• Original purchase price (2014): $390,000
• Purchase closing costs: $12,000
• Capital improvements (kitchen, HVAC, deck): $55,000
• Adjusted cost basis: $457,000
• Gain: $202,750
• Section 121 exclusion (MFJ): $500,000
• Taxable gain: $0

Total tax owed: $0. This is the typical Montgomery County outcome.

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Worked Example 2: Long-Term Owner, Exclusion Exceeded

A single Bethesda owner who bought in 2009 and is selling in 2026.

• Sale price: $1,150,000
• Selling costs (~8.5%): $97,750
• Adjusted sale price: $1,052,250
• Original purchase price (2009): $475,000
• Purchase closing costs: $14,000
• Capital improvements (kitchen, 2 baths, roof, HVAC, deck, windows): $115,000
• Adjusted cost basis: $604,000
• Gain: $448,250
• Section 121 exclusion (single): $250,000
• Taxable gain: $198,250

Tax calculation (assuming $180K of other ordinary income, total taxable income ~$378K):

| Layer | Rate | Tax | |---|---|---| | Federal long-term capital gains | 15% | $29,738 | | NIIT (MAGI > $200K single) | 3.8% | $7,534 | | Maryland state (5.75% top bracket) | 5.75% | $11,399 | | Montgomery County | 3.20% | $6,344 | | Total | 27.75% | ~$55,015 |

The same seller, if married filing jointly, would have used the $500K exclusion and paid zero. Marital filing status moved this number by $55,000.

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Worked Example 3: Investment Property (No Section 121)

A Montgomery County investor sells a rental held for 8 years.

• Sale price: $625,000
• Selling costs: $50,000
• Adjusted sale price: $575,000
• Adjusted cost basis (after depreciation recapture adjustments): $375,000
• Gain: $200,000
• Of which depreciation recapture: $60,000 (taxed at 25% federal)
• Remaining long-term capital gain: $140,000

Tax calculation (assuming $250K MFJ household income):

| Layer | Base | Rate | Tax | |---|---|---|---| | Federal depreciation recapture | $60,000 | 25% | $15,000 | | Federal long-term capital gains | $140,000 | 15% | $21,000 | | NIIT | $200,000 | 3.8% | $7,600 | | Maryland state | $200,000 | 5.50% | $11,000 | | Montgomery County | $200,000 | 3.20% | $6,400 | | Total | | | ~$61,000 |

There's no Section 121 exclusion on investment property — every dollar of gain is taxable. This is why the rent-vs-sell math frequently favors selling the primary residence under the exclusion before converting to a rental (see should I sell or rent out my Maryland house).

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Maryland Non-Resident Withholding (Important if You've Moved Out of State)

If you no longer live in Maryland but you're selling Maryland real estate, the state requires the title company to withhold 8% of the net sale price at closing as estimated tax (Maryland Comptroller — Non-Resident Sale of Real Property).

On a $700,000 net sale, that's $56,000 held back at closing. You then file a Maryland non-resident return after year-end to either claim a refund (if the gain was fully excluded) or settle any remaining tax.

The withholding doesn't change your liability — but it does change your liquidity. Out-of-state sellers planning to roll proceeds into another purchase need to budget for the withholding gap until the refund comes through.

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Frequently Asked Questions

What is the capital gains tax rate in Maryland for real estate in 2026?

Maryland taxes real-estate capital gains as ordinary income at 2%–5.75% state, plus the local county tax (Montgomery County: 3.2%). Federal long-term capital gains are an additional 0%, 15%, or 20%, plus NIIT (3.8%) for higher-income filers. Combined effective rate on a large taxable gain in Montgomery County typically lands at ~27.75%–32.75%.

Do I pay Maryland capital gains tax on the sale of my primary home?

Usually no. Maryland conforms to the federal Section 121 exclusion — $250,000 single / $500,000 married — and any excluded gain is also excluded from Maryland tax. You only owe Maryland (and federal) tax on the portion of the gain that exceeds the exclusion.

Is there a Maryland capital gains tax calculator I can use?

The five-step calculator above is the same math the IRS Schedule D and Maryland Form 502 use. For an actual filing, your CPA will run it on the official forms with your specific income, depreciation, and Maryland subtraction modifications. Online "capital gains calculators" tend to skip the Maryland county layer and the Section 121 exclusion — recommend verifying against the worked examples above.

What is the long-term capital gains tax rate in Maryland?

Maryland does not distinguish long-term from short-term — both are taxed as ordinary income at 2%–5.75% state + county rate. The distinction matters federally: long-term gets the preferential 0%/15%/20% federal rate, short-term gets the ordinary 10%–37% federal rate.

What is the short-term capital gains tax in Maryland?

Same Maryland rate as long-term (ordinary income, 2%–5.75% + county). Federally, short-term gains pay your ordinary federal income rate — typically 24%–32% for Montgomery County dual-earner households, vs the 15% long-term rate. Holding for one year and one day saves materially on federal tax.

Are real-estate capital gains taxed differently from stock gains in Maryland?

At the Maryland and county level, no — both are taxed as ordinary income. Federally, both qualify for the preferential long-term rate. The key real-estate-specific provisions are the Section 121 primary-residence exclusion ($250K/$500K), depreciation recapture for rentals (25% federal), and 1031 exchanges for investment property (deferral only, not exclusion).

How does the Net Investment Income Tax (NIIT) affect a Maryland home sale?

NIIT adds 3.8% federal on top of the capital gains rate for filers with modified adjusted gross income (MAGI) above $200K single / $250K MFJ. It applies only to the taxable portion of the gain — anything excluded under Section 121 is also excluded from NIIT. Most Montgomery County sellers with a fully-excluded primary-residence gain pay $0 NIIT regardless of their MAGI.

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The Bottom Line

For a typical Maryland primary-residence sale, the Section 121 exclusion ($250K single / $500K married) leaves most sellers owing zero capital gains tax — federal, state, and county. The math above only starts mattering when:

1. Your gain exceeds the exclusion (high-equity owners selling appreciated MoCo homes), or
2. You're selling an investment property (no Section 121), or
3. You've converted a primary residence to a rental (partial exclusion + depreciation recapture)

In those situations, the combined federal-plus-Maryland-plus-Montgomery-County effective rate is roughly 27.75%–32.75% on the taxable portion of the gain. That's significant money worth calculating with a CPA before you list.

If you'd like a frank read on your specific situation — comp-based value, net proceeds, exclusion-eligibility check, and a referral to a CPA who specializes in Maryland real estate tax — that's the conversation worth having before you sign a listing agreement.