1031 Exchanges in Maryland: Rules, Taxes, Insurance, and the Long Arc

A Shop 1031 research page. Reviewed 2026-06-03. Every claim sourced; sources collected at the foot of the page.

Maryland is a high-cost conforming state with one of the more demanding nonresident-withholding paperwork regimes in the country, not a low-friction Mid-Atlantic jurisdiction. The distinction matters because Maryland imposes 8.0 to 8.25 percent withholding on nonresident sellers and requires the §1031 exemption to be applied for through the Comptroller’s office on Form MW506AE at least twenty-one days before settlement. Maryland conforms to federal §1031 through Maryland Tax-General Article Title 10, taxes recognized boot at graduated rates topping at 5.75 percent state plus county add-on.

§1. 1031 mechanics in Maryland

The federal floor applies under 26 U.S.C. §1031 and 26 C.F.R. §1.1031(k)-1. ^{1 2}

Maryland conforms to federal §1031 under Maryland Tax-General Article Title 10. Recognized boot is taxed at the Maryland graduated rate topping at 5.75 percent at the state level, plus a county income tax add-on that varies by county (commonly 2.5 to 3.2 percent). ³

Maryland imposes a nonresident real estate withholding under Maryland Tax-General Article §10-912, currently at 8.0 percent for individuals and 8.25 percent for entities, on the proceeds of sales of Maryland real property by nonresidents. The §1031 exemption is claimed via Form MW506AE (Application for Certificate of Full or Partial Exemption), which must be submitted to the Comptroller of Maryland at least twenty-one days before settlement, with a cover letter from the QI confirming the §1031 structure. If the seller has not previously filed Maryland Form 505 (Nonresident Income Tax Return), the Comptroller may reject the exemption application. The §1031 exemption is a paperwork-intensive process and should be initiated well before the relinquished close. ^{4 5}

Maryland imposes a state transfer tax under Maryland Tax-Property Article §13-203 at 0.5 percent of consideration, and counties impose additional recordation taxes and transfer taxes ranging from 0.5 to 1.5 percent, producing combined transfer-and-recordation costs of 1 to 2 percent. There is no §1031 exemption from the transfer or recordation tax. On a $5,000,000 acquisition in a 1.5 percent jurisdiction, the combined state-plus-county transfer-and-recordation runs $100,000. ⁶

Maryland imposes no state-level QI registration regime. Federal §1031 rules apply.

Maryland is an attorney-state for real estate closings.

§2. Property tax in Maryland

Maryland has an effective property tax rate of approximately 1.05 percent of owner-occupied housing value, near the 1.02 percent national median. The structural mechanics are governed by Maryland Tax-Property Article, with assessment administered by the Maryland State Department of Assessments and Taxation (SDAT) at the state level (a centralized administration uncommon among states) and rate-setting at the county and Baltimore City level. Maryland reappraises property on a three-year cycle. ⁷

Harlow’s note on unit economics. On a $5,000,000 Maryland commercial acquisition in the Baltimore-Washington corridor, year-one property tax runs roughly $50,000 to $90,000 depending on the specific county and any city-level overlay (Baltimore City carries a meaningfully higher rate than surrounding Baltimore County).

§3. Property insurance in Maryland

Maryland property insurance carries coastal hurricane exposure on the Eastern Shore and along the Chesapeake Bay, with inland severe-thunderstorm, tornado, and ice-storm exposure across the state. The Maryland Insurance Administration regulates carrier conduct. ⁸

Harlow’s note on unit economics. For a $5,000,000 Maryland inland commercial property, expect property-insurance expense in the range of 0.4 to 0.8 percent of insured value. For Eastern Shore coastal property, 0.7 to 1.4 percent.

§4. Demographic trends

Maryland’s population stood at approximately 6.2 million as of 2025 Census estimates, with roughly flat growth. Net domestic migration to Maryland has been negative for most of the past decade, partially offset by international migration. ^{9 10}

Median household income in Maryland was approximately $100,000 in 2024, materially above the national median, reflecting the federal-employment concentration. ^{11 12}

The major Maryland markets are Baltimore-Columbia-Towson (approximately 2.85 million population), the Washington DC suburbs (Montgomery and Prince George’s Counties, approximately 2.0 million), Frederick (approximately 290,000), and the Eastern Shore (Annapolis, Ocean City, the Bay corridor). Montgomery and Howard Counties concentrate the deepest commercial market in the state; Baltimore City carries the broadest cap-rate range across asset classes.

§5. Unique legal and financial considerations

The first is the Form MW506AE paperwork process for nonresident sellers, addressed in §1.

The second is the county-level transfer and recordation tax stack variation. Montgomery County, Prince George’s County, Anne Arundel, and Baltimore City each have distinct stacks. Confirm the local rate before identification.

The third is the Maryland Smart Growth and Agricultural Preservation programs, which affect rural and urban-edge acquisitions through use restrictions and tax incentives.

The fourth is the centralized assessment administration through SDAT, which produces a uniform assessment process across counties but with rate-setting variation.

§6. Closing summary and the work ahead

The Maryland 1031 exchanger is operating in a market with a clear set of distinguishing features. The federal floor applies; Maryland fully conforms at graduated state rates topping at 5.75 percent with county add-ons; nonresident withholding on Form MW506AE requires twenty-one-day advance Comptroller filing for §1031 exemption; the state and county transfer-and-recordation tax stack does not exempt §1031; property tax is administered centrally by SDAT on a three-year reappraisal cycle; coastal hurricane exposure applies on the Eastern Shore; the federal-employment median income concentration shapes the Washington and Baltimore submarkets; Smart Growth and Agricultural Preservation programs affect specific submarkets. None of these is a reason to avoid a Maryland exchange. Each is a reason to underwrite one carefully. The jurisdiction-specific factors above are starting-point context. A state-experienced CRE professional will translate them into deal-specific judgment.

This is the question Shop 1031 was built to compress. Every Maryland offering memorandum on the platform is normalized to a single schema, underwritten at re-let to the buyer’s specific equity, debt, and DSCR floor, and ranked by Dark Shell Score. For a market with Maryland’s specific overlay, that compression is decisive because the variables that move outcomes (MW506AE timing and prior-year Form 505 history, county-stack variation, SDAT reappraisal cycle, Smart Growth and Preservation overlays) are knowable in advance and frequently missed in conventional buy-side workflows.

This page is the working map. The actual exchange is run by people. A Maryland-licensed real estate attorney, a Maryland-licensed CPA familiar with §1031, a Qualified Intermediary, and a CRE professional who knows this market and these properties. Shop 1031 is the analytics layer that triages which deals deserve your time. The professionals do the work.

See underwritten Maryland deals that fit your exchange →

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Shop 1031 is an independent analytics platform. We are not a brokerage, a law firm, a tax advisor, a lender, or a Qualified Intermediary. Every 1031 exchange should be reviewed by a state-licensed real estate attorney, a CPA familiar with IRC §1031, and a QI. Brokerage and advisory services, when used, are provided by independently licensed third parties under separate engagement. This page is research, not advice. The Maryland-specific surfaces discussed (Form MW506AE twenty-one-day advance filing for the §1031 withholding exemption, prior-year Form 505 filing history affecting exemption approval, state-and-county transfer-and-recordation tax stack with no §1031 exemption, SDAT centralized assessment and three-year reappraisal cycle, Smart Growth and Agricultural Preservation program interactions) each carry material risk if mishandled and should be addressed with a Maryland-licensed attorney, a Maryland-licensed CPA, and a Qualified Intermediary before identification, not after.

Federal authority: 26 U.S.C. §1031; 26 C.F.R. §1.1031(k)-1.

Maryland authority: Md. Tax-Gen. Art. Title 10 (income tax conformity), §10-912 (nonresident withholding); Md. Tax-Prop. Art. §13-203 (state transfer tax).

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