Real estate installment sales

With installment sales, you or the real estate escrow person (REEP) may report the sale or transfer as an installment sale if there will be at least one payment made after the tax year of the sale.

Example:

You bought property in February 2020
Your REEP reports the installment sale to us
Any payments made after December 31, 2020 are considered installment payments

Withholding requirements

The withholding on the sale is 3 1/3% (.0333) of the down payment during escrow.

Buyers/transferees are required to:

Withhold on the principal portion of all payments made after the close of the real estate transaction
- Unless we receive an approval letter for elect-out method

We do not require withholding:

If other exemptions apply, download our Real Estate Withholding Tax Statement (Form 593)
On the installment payment’s interest portion

Calculate installment payment withholding

You can calculate the withholding amount with either the Total Sales Price Method or the Alternative Withholding Calculation certified.

Visit Form 593 Instructions for more information on calculating the installment payment.

Buyer information

Generally, the real estate escrow person (REEP) will complete the tasks below; though you may need to complete these tasks if you do not have a REEP.

During escrow

Calculate the withholding amount using Form 593 Instructions
Withhold on the required first installment payment you receive in escrow
Submit:
- Form 593
- Copy of the promissory note
- Amount you withheld with copy of your Payment Voucher for Real Estate Withholding (Form 593-V)
Your promissory note must include:
- Principal amount
- Installment amount
- Interest rate
- The repayment period’s length

After escrow

Continue to withhold on remaining installment payments. For each payment you must:

Calculate the withholding amount using Form 593 instructions
Send us each payment with Payment Voucher for Real Estate Withholding (Form 593-V)
Send us Form 593 by the 20th day of the next month
Send the seller a copy of your Form 593
Keep a copy of Form 593 in your records

If you’re sending your final payment, write “Final Installment Payment” on the bottom of Form 593.

Write to us if the following items change:

Installment sale or promissory note terms
Your payment schedule

Mail: Witholding Services and Compliance MS F182
Franchise Tax Board
Po Box 942867
Sacramento CA 94267-0651