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Withholding Requirements for Sale of California Real Estate

What's new

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

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.

Withholding rates

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)