A Tax Law Change You Should Know About!

From the California Association of Realtors News Letter:

“Tax alternative to 3.33 percent California withholding: Effective Jan. 1, 2007, sellers required to have 3.33 percent of the sales price withheld for income tax purposes may elect an alternative withholding. The alternative withholding is an estimate of the seller's tax liability calculated by multiplying the recognized capital gain by the highest state tax rate for individual taxpayers (or the corporate tax rate for corporations), regardless of the taxpayer's actual tax bracket. Under existing California law, a buyer must withhold 3.33 percent of the sales price from the seller's proceeds unless an exemption applies, such as when the property is the seller's principal residence, the property is in a 1031 exchange, or the seller will not realize any capital gains. The new law applies to non-exempt sellers who may now elect to have less than 3.33 percent withheld. A seller opting for this tax alternative withholding must certify the amount to be withheld in writing under penalty of perjury.”