Franchise Tax Board

Withholding Requirements for Sale of California Real Estate

What's New for 2009

  • Educational withholding video for Real Estate Escrow Persons and buyers. Link to text version.
  • Assembly Bill 3078 made the following changes to withholding laws effective 01/01/09:
    • Withholding Rates — Non-California partnerships are now subject to withholding requirements on a sale of California real property at a rate of 3 1/3 percent of sales proceeds or 9.55 percent of gain. The alternative withholding rates for the sale of California real property by S corporations increased to 11.05 percent and to 13.05 percent for financial S corporations.
    • Installment Sales — Buyers must now withhold on the principal portion of each installment sale payment if the sale of California real property is structured as an installment sale. We changed Form 593-I to acknowledge the buyer's obligation to withhold.

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 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.

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 prior year withholding rates, see 2008 Form 593.

For more information, refer to 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., not toll-free)
916.845.9512 Fax

Email

WSCS.GEN@ftb.ca.gov This is not a secure email address. 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