Tax Withheld on Sale of Real Estate in California

Get your CA FTB withheld tax refund today by contacting Mike Habib, EA at 1-877-78-TAXES (1-877-788-2937)

CA Tax Rates

According to the California State Franchise Tax Board (FTB), partnerships that are not based in California should file withholding tax on the sale of real estate in the state. The CA tax rate is at 3 1/3 percent of the proceeds from the sale or 9.3 percent of the gain. The board also increased the alternative withholding rates for real estate sales by S corporations. These groups are now subjected to a 10.8% rate for the sale of real property. On the other hand, financial S corporations are subjected to withholding rates of 12.8%.

For installment sales

For real property acquired on installment, the buyer is now required to file a tax withheld on the principle portion for the payment of installment sales. This applies to California real estate properties that are sold under a clear installment structure. The FTB modified Form 539-I to accommodate this change.

Steps in withholding real estate CA tax

It’s important to note that withholding CA tax is mandatory for all types of transfers of CA real property ownership. This rule is still subject to exemptions as per the board’s guidelines.

According to the law, anyone who buys real property in the state of California should withhold taxes. He or she can request the escrow officer of their real estate transaction to do so on their behalf. For this, the escrow officer should go through the following procedures:

  • Send a written notification of withholding requirements to the buyer using the FTB Publication 1016 as basis.
  • Provide the seller with a copy of the FTB593 booklet that comes with the Forms 593-C and 593-E.
  • Withhold as required.
  • Complete the forms and furnish the seller with a copy of the forms.
  • Send the accomplished documents along with the payment for taxes withheld by the 20th day of the month after the escrow closes.

Errors to avoid

Just like any other type of tax return that needs to be filed, errors cannot be avoided. You want to be more mindful of these potential mistakes to ensure that you don’t run into trouble later on. For instance, make sure that you accurately complete all the needed forms. It’s important for you to answer all the fields as they apply and indicate a telephone number where you can be contacted in case the tax board finds errors in your form. Make sure that you include the right identification numbers on your withholding ID documents. Check out everything that is required and refrain from sending unnecessary documentation to the tax board.

Get your CA FTB withheld tax refund today by contacting Mike Habib, EA at 1-877-78-TAXES (1-877-788-2937).

To get help on California Real Estate Tax withholding laws, contact Mike Habib, EA (https://www.myirstaxrelief.com). Mike Habib will personally look into your tax case so you can get proper representation and avoid excessive tax penalties due to improperly filed tax returns.