by James F. Scully Jr., CPA
My company is transferring me from Modesto to Maryland. I have lived in a house, which I own, for a year. Since the move is for employment reasons, will the state take any withholding tax from the proceeds of the sale of my house?
Beginning in 2003, California generally imposes a 3.3 percent withholding tax on the sale price of an individualís real estate.
The withholding tax does not apply under several situations, however. Property that is the principal residence of the seller usually qualifies for an exemption from the withholding tax. Normally, a taxpayer must live for two years out of five years in a house for it to be considered his principal residence. (The two years do not have to be consecutive.) This is the same definition as the federal capital gain exclusion. But because you are being transferred, you likely qualify for the exemption even if you did not live in the house the requisite two years.
Also, if you sell the house for less than $100,000 (rather unlikely in California, I know), the withholding tax does not apply.
A taxpayer claiming any of the exemptions will need to prepare the proper withholding tax forms (signing under penalty of perjury). You might want to consult a CPA in the Modesto area to ensure that you comply with the law while making sure that you are not paying more in taxes than you need to. To find a CPA in Modesto, go to /find/index.html.
James F. Scully Jr., CPA, is a sole practitioner in Thousand Oaks, Calif. You can reach him at (805) 777-7100.
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