Selling a Vacant Rental Property in Maryland (2026): Taxes, Costs and Prep

Last reviewed: October 23, 2026

Short answer: a vacant rental usually sells best once it is cleaned out, repaired and looks cared for, and every month it sits empty costs you the mortgage, taxes, insurance and utilities with no rent coming in. Before you list, check three things: whether your insurance still covers a vacant house, how much depreciation you will have to recapture, and, if you no longer live in Maryland, the 8.75% nonresident withholding that can be taken out of your proceeds at settlement.

Sell now or rent it again?

Run both numbers before deciding. Selling turns the equity into cash and ends the landlord work, but it triggers tax on the gain and the cost of a sale. Re-renting keeps the income and lets the property keep appreciating, but you take on turnover, vacancy and repair risk. Our free rental analysis estimates the rent the property would bring, and when renting instead of selling makes sense walks through the trade-off.

What a vacant rental costs you each month

• Mortgage, property tax and HOA or condo fees, which do not stop when the tenant leaves.
• Utilities. Keep heat on in winter to protect the pipes.
• Insurance. Many landlord and homeowner policies limit or exclude some coverage once a house has been vacant for a set period, often 30 to 60 days. Read the vacancy clause and ask your agent whether you need a vacant-property policy or endorsement.
• Upkeep. Lawn, snow, gutters and someone checking for leaks and break-ins. Bluebeam’s vacant property checks start at $99 per visit with dated photos.

Getting the house ready to list

1. Close out the tenancy. Do a move-out walkthrough with photos. In Maryland, the security deposit generally has to be returned, with an itemized list of any deductions, within 45 days after the tenancy ends.
2. Clear what was left behind and haul it.
3. Fix the punch list. Patch, paint, replace broken fixtures and anything an inspector will flag.
4. Deep clean and tidy the yard before listing photos.
5. Decide how much to spend. Spend on what a buyer will pay for, not on a full renovation. An as-is sale to an investor is faster but usually nets less.

Bluebeam handles rental turnover, cleanup and pre-listing repairs at $45 per hour per worker, with contractors, haulers and materials billed at cost with no markup.

Taxes to plan for before you sell

Depreciation recapture

The depreciation you claimed, or were entitled to claim, while the property was rented reduces your tax basis. On a sale, that portion of the gain is generally taxed federally as unrecaptured Section 1250 gain at a maximum rate of 25%, with the rest taxed as a long-term capital gain if you held the property more than a year. Pull together your purchase records, improvement receipts and depreciation schedules before you list.

If it used to be your home

If you owned and lived in the house for at least two of the five years before the sale, part of the gain may qualify for the home-sale exclusion of up to $250,000, or $500,000 for married couples filing jointly. Periods of rental use and the depreciation itself can limit the exclusion, so this needs a careful calculation.

Deferring the tax with a 1031 exchange

Buying another investment property through a like-kind exchange can defer the gain, but the deadlines are strict and a qualified intermediary has to be in place before settlement.

Maryland nonresident withholding

If you no longer live in Maryland, the settlement agent generally must withhold Maryland income tax from your proceeds. Effective July 1, 2025, the rate is 8.75% for nonresident individuals, estates and trusts and 8.25% for nonresident entities. Withholding is a prepayment, not the final tax: you reconcile it on a Maryland nonresident return. A full or partial exemption certificate (Form MW506AE) can reduce it when the expected gain is small, and sellers with a sale price of $1.5 million or more can no longer request a tentative refund and must wait for the annual return.

Transfer and recordation taxes

Maryland state and county transfer and recordation taxes are due at settlement. Who pays which share is negotiable and is set in the sales contract.

Common questions

Is it better to sell a rental vacant or with a tenant in place?

Vacant is usually easier to show, repair and sell to an owner-occupant, who often pays the most. A tenant-occupied sale keeps rent coming in but generally limits you to investor buyers, and the existing lease typically continues after the sale.

I moved out of Maryland. Will money be withheld at settlement?

Generally yes: 8.75% for individuals as of July 1, 2025, unless you qualify for an exemption. Talk to your tax preparer early, because an exemption certificate has to be applied for before settlement.

How long can a rental sit empty before it becomes a problem?

The insurance vacancy clause is often the first deadline. Physical problems such as frozen pipes, leaks and break-ins can happen at any time, which is why regular checks matter most in winter.

Sources: Comptroller of Maryland Tax Alert on withholding for nonresident sales of real property (April 2026) and Forms MW506AE and MW506NRS; Internal Revenue Code Sections 121, 1031 and 1250; Maryland Real Property Article on security deposits. General information, not tax or legal advice. Confirm your situation with your tax preparer and attorney.