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Franchise Tax Board

Withholding Requirements for Sale of California Real Estate

What's New

  • Increase in rates—Assembly Bill X3 3 increased the California maximum income tax rate to 9.55 percent for tax years beginning on or after January 1, 2009, and amended Revenue and Taxation Code Section 17041. The withholding rates also increased for optional gain on sale to 9.55 percent for individuals and non-California partnerships, to 11.05 percent for S corporations, and to 13.05 percent for financial S corporations.
  • Processing changes for withholding forms and payments—For taxable years beginning January 1, 2010, we are implementing a new process for real estate withholding forms and payments. Follow our new instructions carefully to avoid errors and the possible assessment of penalties and interest. Effective January 1, 2010, the following items impact the filing and reporting of real estate withholding:
    • Carbon copies—Form 593, Real Estate Withholding Tax Statement, no longer contains carbon copies. It is now a single page form; however, you must still complete, file, and distribute three copies of Form 593. See Form 593 instructions for more information.
    • Payment vouchers—Form 593-V, Payment Voucher for Real Estate Withholding, is no longer used just when Form(s) 593 are submitted electronically. You must now submit a real estate withholding payment with Form 593-V when you submit Form(s) 593 electronically or by mail. Send only one voucher per payment.
    • Faxed forms—We no longer can process real estate withholding forms we receive by fax. Refer to each form’s instructions for submission time frames.

Real Estate Withholding Information

Attach a complete copy of your federal return (including schedules) to your California return.

Real Estate Foreclosures and Short Sale Transactions

Withholding is required for real estate foreclosures and short sale transactions unless any exemptions certified on Form 593-C apply or the sale qualifies for one of the following automatic exclusions:

  • The total sale price is $100,000 or less.
  • The seller is a bank acting as a trustee, other than a trustee of a deed of trust.
  • The buyer is acquiring the property as part of a foreclosure.

In the case of a foreclosure, the buyer must be acquiring the property under one of the following conditions for the seller to be excluded from withholding:

  • A power of sale required under a mortgage or deed of trust.
  • A decree requiring foreclosure.
  • A deed in lieu of foreclosure.

For more information on real estate foreclosures and short sale transactions, refer to Publication 1016, Real Estate Withholding Guidelines. (Note: the 2010 version of this publication will be available in mid-January.)

Withholding Rates

California law requires withholding of 3 1/3 percent of the total sale price. Alternatively, you may elect to withhold on the gain on sale and apply the following rates:

  • 9.55 percent for individuals and non-California partnerships (effective 01/01/09)
  • 8.84 percent for corporations
  • 10.84 percent for banks and financial corporations
  • 11.05 percent for S corporations (effective 01/01/09)
  • 13.05 percent for financial S corporations (effective 01/01/09)

For more information, refer to the Form 593-C and 593-E Booklet, Real Estate Withholding Certificate and Computation of Estimated Gain or Loss.

Certain sellers may be exempt from withholding. The forms and publications below will help you understand California's withholding requirements.

Withholding Forms and Publications

Contact Us

Phone

888.792.4900 (Within the U.S.)
916.845.4900 (Outside the U.S.)
916.845.9512 Fax

Email

This is not a secure email address: WSCS.GEN@ftb.ca.gov . Please do not send confidential information.

Payments and correspondence

State of California
Withholding Services and Compliance MS F182
Franchise Tax Board
PO Box 942867
Sacramento CA 94267-0651

Express mail/Overnight delivery

State of California
Withholding Services and Compliance MS F182
Franchise Tax Board
Sacramento CA 95827