California’s 3⅓% Real-Estate Withholding (Form 593)
If you are selling a California home, escrow will mention Form 593 and a 3⅓% withholding — and it catches a lot of sellers off guard. The good news: it is a prepayment, not a new tax, and many sellers are exempt or get money back. Here is what it means, with the Franchise Tax Board and a CPA for the details.
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What the Withholding Is
Per the California Franchise Tax Board, real-estate withholding is a prepayment of the state income tax that may be due on the gain from selling California real property. The standard amount is 3⅓% of the total sale price, collected at closing and sent to the FTB. An alternative calculation based on the actual gain is also available on Form 593.
Who Is Exempt
Not everyone has to have the full amount withheld. You may qualify for an exemption — certified on Form 593 — if, for example, the property was your principal residence under IRC Section 121, or the sale results in a loss or zero gain. The exemptions (other than the principal-residence box in some cases) are not automatic: you must complete and sign Form 593, under penalty of perjury, and give it to the settlement agent before closing.
Getting It Back
If the full 3⅓% is withheld but your actual tax on the gain turns out to be lower — or zero — you do not lose that money. It is credited against your California income tax when you file your return for the year, and any excess comes back as a refund. So even if withholding happens at closing, it is reconciled later against what you actually owe.
How We Help
The title company handles the mechanics of Form 593 at closing, and we keep the sale itself simple — as-is, fast, on your timeline. For whether you qualify for an exemption and how the withholding affects your return, check with the Franchise Tax Board and a CPA. This is general information, not tax advice.
Get a Cash Offer With a Clean Closing
Call (559) 392-2243 or fill out the form. We will give you a fair all-cash offer in 24 hours and a clean closing, with the title company handling Form 593.
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