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Seller proceeds · 5 statesState withholding on real estate sales: who holds back what

Besides federal FIRPTA, several states require part of the seller's proceeds to be withheld at closing and sent to the state tax agency. On a $500,000 sale: California 3⅓% of the price ($16,667) for most sellers, residents included, unless an exemption is certified; Oregon the least of 4% ($20,000), the net proceeds or 8% of the gain for nonresident individuals and out-of-state C corporations; Maine and Vermont 2.5% ($12,500) for nonresident sellers; South Carolina the top individual rate on the gain or the amount realized for nonresidents. Each state stops withholding when the seller signs the right certificate – a primary residence, a loss, residency or a sale of $100,000 or less in CA, OR and ME.

Who withholds, how much and an example

  1. California (R&T §18662)

    3⅓% of the sales price, or an elected amount on the gain; applies to individuals, residents included → $16,667.

  2. Oregon (ORS 314.258)

    Escrow withholds the least of 4% of consideration, the net proceeds or 8% of the gain; nonresident individuals and out-of-state C corporations → up to $20,000.

  3. South Carolina (§12-8-580)

    Buyer withholds the top individual rate on the gain (with a seller affidavit) or on the amount realized; 5% for nonresident corporations.

  4. Maine (36 M.R.S. §5250-A)

    Buyer withholds 2.5% of the consideration from nonresidents, sent within 30 days → $12,500.

  5. Vermont (32 V.S.A. §5847)

    Buyer withholds 2.5% of the consideration from nonresidents, sent within 30 days → $12,500.

No withholding when

  • Sale of $100,000 or less: California and Oregon (not over $100,000), Maine (under $100,000).
  • Seller certifies residency in the state: Maine and Vermont.
  • Principal residence gain excluded under IRC §121: California, Oregon and South Carolina (to the extent excluded).
  • Net loss or no recognized gain: California; Oregon when the seller affirms no Oregon tax is likely.
  • Foreclosure or deed in lieu: California, Oregon, Maine and Vermont, in the terms each statute sets.

What the TC checks before closing

  • Seller's residency and entity type – asked early, not at the closing table.
  • The signed exemption certificate or affidavit, in the file before funds are disbursed.
  • The withholding line on the seller's settlement statement and who remits it, and by when.

Questions about this withholding

Why is money withheld from my proceeds when I sell?

In California, Oregon, South Carolina, Maine and Vermont the buyer or escrow must withhold a part of the price for state income tax unless an exemption applies; it is a prepayment you claim on your state return.

Does California withhold from residents?

Yes. §18662(e) applies to individuals whether or not they live in California; residents usually avoid it by certifying a principal residence, a loss or another exemption.

Is this the same as FIRPTA?

No. FIRPTA is federal and applies to foreign sellers; state withholding is a separate state income tax prepayment and can apply to US sellers.

Related guides

Put the residency question and the exemption certificate on the checklist as tasks with an owner and due date in ClosingCode, with the documents attached to the deal.

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Sources: Cal. Rev. & Tax. Code §18662; ORS 314.258; S.C. Code §12-8-580; 36 M.R.S. §5250-A; 32 V.S.A. §5847 (official legislature sites, read October 25, 2026).

General information, not legal or tax advice. ClosingCode is software; it is not a law firm or brokerage.