General Withholding Rules on Foreign Seller Sales
by Michael Brooks, Esq.
(760) 346-6140 or (844) 260-6140
The General IRS Rule:
The IRS requires the escrow company to withhold 15% of the sales price on the sale of United States real property interests
by foreign persons (on sales above $1,000,000), and either 15% or 10% on sales between $300,001 and $1,000,0000,
and either 15% or $0 for sales of $300,000 and under. The lower withholding amount at both levels requires the buyer
to purchase the property with the intent to use it as a residence.
The General FTB Rule:
California requires withholding of 3.3% of the sales price (or 12.3%of the gain optional rate, or 0 withholding in a loss
sale, but the 0 withholding in a loss sale is only available if the IRS has issued the foreign seller an individual taxpayer ID
number (“ITIN”) by the closing date, otherwise seller is stuck with 3.3% x sales price.) California requires withholding on:
all individuals (even California residents); non-California partnerships; non-California corporations; most trusts; estates.