Withholding Requirements for Sale of California Real Estate
Proposition 30 increased the personal income tax rate on individuals. Some of our withholding rates are based on the maximum personal income tax rates. As a result, the optional gain on sale withholding tax rates for individuals, non-California partnerships, S corporations and financial S corporations increased. The increase was effective January 1, 2012. However, our revised forms did not reflect the increased rates until late 2012. If the lower rate was used during 2012, we will find reasonable cause and not impose penalties on any underpayment that was due to the Proposition 30 rate increase.
The new rates are as follows:
- 12.3 percent for individuals and non-California partnerships
- 13.8 percent for S corporations
- 15.8 percent for financial S corporations
Real estate withholding information
- Processing changes.
- Webinars - Our webinars cover a variety of withholding topics – some general and some specific to certain industry types or stakeholders.
- Subscription services - Sign up for email updates on real estate withholding and other withholding topics.
- Educational withholding video for real estate escrow persons and buyers | Text version.
- FTB 761 RE - Top 10 Real Estate Withholding Errors.
- Frequently Asked Questions.
- Real estate withholding agents may be required to file withholding data electronically.
- Filing requirement - You must file a California tax return to report your real estate sale and to claim real estate withholding:
- Resident individual—Form 540 Booklet
- Nonresident and part-year resident individual—Form 540NR Booklet
- Corporation—Form 100 Booklet
- S Corporation—Form 100S Booklet
- Fiduciary—Form 541 Booklet
- Partnership—Form 565 Booklet
- Limited liability company—Form 568 Booklet
Find current tax booklets on FTB's forms and publications page. 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 FTB Pub. 1016, Real Estate Withholding Guidelines.
California law requires withholding of 3 1/3 percent (.0333) of the total sale price. Alternatively, you may elect to withhold on the gain on sale and apply the following rates:
- New 12.3 percent for individuals and non-California partnerships
- 8.84 percent for corporations
- 10.84 percent for banks and financial corporations
- New 13.8 percent for S corporations
- New 15.8 percent for financial S corporations
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
Find current forms on our withholding forms and publications page.
- Form 593, Real Estate Withholding Tax Statement
- Form 593-C and 593-E booklet, Real Estate Withholding Certificate and Computation of Estimated Gain or Loss
- Form 593-I, Real Estate Withholding Installment Sale Agreement
- Form 593-V, Payment Voucher for Real Estate Withholding
- FTB Pub. 1016, Real Estate Withholding Guidelines
- FTB 7429, Do I Need To Withhold On This Trust?
- FTB 7429LLC, Real Estate Withholding for Sales by Limited Liability Companies (LLCs)