California Form 593 Real Estate Withholding and FIRPTA for Sellers
Form 593 is the California Franchise Tax Board (FTB) form escrow uses to report state income tax withholding on a sale of California real estate. Unless you certify an exemption, escrow withholds 3 1/3% of the sales price, or, if you elect, your estimated gain times the maximum tax rate, and sends it to the FTB. It isn’t an extra tax: it is a prepayment you claim as a credit when you file your California return.
Withholding applies to California residents, nonresident individuals and non-California entities alike, according to the FTB’s Publication 1016 (revised February 2026). Sellers of a second home or a rental are the ones most likely to see money withheld, because the principal-residence exemption doesn’t apply to them. Foreign sellers face a separate federal withholding under FIRPTA, covered further down. This page explains both from the seller’s side, as one step in the home-selling process.
When California withholding applies, and when it doesn’t
The rule comes from Revenue and Taxation Code 18662(e). The person who closes the sale, which the FTB calls the real estate escrow person (usually the escrow or title company), must notify the buyer of the withholding requirement and handles the withholding and filing.
Withholding is not required when:
- the total sales price is $100,000 or less (multiple parcels in one escrow are added together for this test);
- the property is acquired through foreclosure or a deed in lieu of foreclosure; or
- you certify a full exemption on Form 593.
If escrow doesn’t receive a completed and signed Form 593 before closing, it must withhold, and you lose the exemption for that transaction. You can still recover the money, but only through your tax return.
Exemptions sellers can certify
Form 593 lists full exemptions in Part III and partial or conditional ones in Part IV. You sign the form under penalty of perjury, and knowingly giving a false certificate to avoid withholding carries a penalty of $1,000 or 20% of the required withholding, whichever is greater.
| Exemption | When it applies | Watch for |
|---|---|---|
| Principal residence | The home qualifies under IRC Section 121, generally owned and used as your main home for two of the five years before the sale | Exceptions exist for some shorter periods |
| Last used as principal residence | The property was last used as your main home, regardless of the two-year period | A home you moved out of and then rented may not qualify |
| Loss or zero gain | The amount realized is less than or equal to your adjusted basis; you complete the gain worksheet in Part VI | “You may not certify that you have a net loss or zero gain just because you do not receive any proceeds” |
| Involuntary conversion | The property was destroyed, seized or condemned and you intend to acquire similar property (IRC 1033) | Relevant after a fire loss |
| Entity sellers | Corporations with a permanent place of business in California; California partnerships and qualified LLCs; tax-exempt entities; insurance companies, IRAs, qualified pension plans and charitable remainder trusts | S corporations and partnerships still withhold for nonresident owners; a disregarded single-member LLC is treated as its owner |
| 1031 exchange (partial) | Exempt at the initial transfer of a simultaneous or deferred exchange | Withholding applies if you receive more than $1,500 of cash or other property; a failed exchange is withheld at 3 1/3% of the sales price |
| Installment sale (partial) | Withholding applies to the down payment and to the principal portion of later payments | See below |
Whether a sale qualifies for the principal-residence exclusion, or produces a gain at all, is a tax question. Our guide to capital gains on a California home sale explains the Section 121 rules and how basis is figured.
Two ways to calculate the amount
The default is the total sales price method: 3 1/3% of the sales price. You can elect instead to have withholding figured on your estimated gain, multiplied by the rate for your type of seller:
| Seller type | Gain-on-sale election rate |
|---|---|
| Individual | 12.3% |
| Non-California partnership | 12.3% |
| Trust (grantor or nongrantor) | 12.3% |
| Corporation | 8.84% |
| Bank and financial corporation | 10.84% |
| S corporation | 13.8% |
| Financial S corporation | 15.8% |
A hypothetical example
An individual sells a Sonoma County rental for $1,200,000. Under the default method, escrow withholds $1,200,000 × .0333 = $39,960. If the seller’s estimated gain is $150,000, the election produces $150,000 × 12.3% = $18,450. The election helps most when the gain is small relative to the price. The FTB warns that the estimate must not show a loss when you actually have a gain, so have your tax adviser prepare the numbers.
Either way, the withholding is a credit against what you owe, not the final tax. A seller with a large gain may owe more when filing; one with a small gain may get a refund.
The timeline from listing to tax return
- Early in escrow: escrow sends you Form 593 to complete. Decide with your tax adviser whether you qualify for an exemption or want the gain election.
- Before closing: you complete and sign the form under penalty of perjury and return it to escrow.
- At closing: escrow withholds the amount from your proceeds, if any applies. It shows on your closing statement.
- By the 20th day of the following month: escrow sends Form 593 and the payment to the FTB, and gives you a copy.
- When you file: you report the sale on your California return and claim the amount withheld, attaching a copy of Form 593.
The FTB doesn’t refund withholding through escrow. After closing, “amounts withheld may be recovered only by claiming the withholding as a credit,” and any overpayment is refunded after the FTB processes your return. Include the expected withholding on your seller net sheet so the cash you receive at closing isn’t a surprise.
Second homes, rentals and sellers who live elsewhere
A wine country second home or a rental usually doesn’t qualify for the principal-residence exemption, so unless the sale produces a loss or another exemption applies, expect withholding. Owners weighing that sale may find our guide to second homes versus investment property useful for how the two are taxed differently, and our Sonoma County second-home guide for the ownership side.
Living out of state doesn’t change the rule. Nonresident sellers are withheld on the same basis and generally need to file a California nonresident return to claim the credit. If you’re managing the sale from a distance, our guide to selling a home while living elsewhere covers signing and escrow logistics. For rental owners, our guide to selling a rental property in California covers depreciation recapture and tenants.
1031 exchanges and installment sales
Exchanges. A sale structured as a 1031 exchange is exempt from withholding at the initial transfer. If you receive more than $1,500 in cash or other property from the transaction, the intermediary in a deferred exchange (or escrow in a simultaneous one) withholds on it. If the exchange fails, the intermediary withholds 3 1/3% of the sales price, or the amount under the gain method. Our 1031 exchange guide explains the structure, and our guide to 1031 identification rules covers the 45-day deadline that most often causes exchanges to fail.
Installment sales. When you carry back a note, escrow withholds 3 1/3% of the down payment at closing and sends the FTB a copy of the promissory note. The buyer then withholds on the principal portion of each later payment and sends it to the FTB by the 20th day of the following month. You can elect out by reporting the full gain in the year of sale and asking the FTB in writing to release the buyer; the FTB has 30 days to respond, and the buyer keeps withholding until approval. See our guide to seller financing in California.
FIRPTA: federal withholding for foreign sellers
If the seller is a foreign person, the federal Foreign Investment in Real Property Tax Act applies as well as Form 593. Under IRC 1445, the buyer must withhold 15% of the amount realized, which is generally the sales price. In most cases the buyer is the withholding agent, and escrow handles the mechanics.
- Residence exceptions. No withholding is required if the buyer is an individual acquiring the property as a residence and the amount realized is no more than $300,000; the buyer or a family member must plan to live there at least 50% of the days it is used in each of the first two 12-month periods. If the buyer will use it as a residence and the amount realized is no more than $1,000,000, the rate is 10% instead of 15%.
- Non-foreign certification. A U.S. seller avoids FIRPTA withholding by certifying, under penalties of perjury, that they are not a foreign person, with their name, U.S. taxpayer identification number and address. Escrow can hold it as a qualified substitute.
- Withholding certificate. A foreign seller whose actual tax will be lower can apply on Form 8288-B for a certificate that reduces or eliminates withholding. If the application is filed by the closing date and still pending, the buyer withholds but pays it over within 20 days after the IRS mails its decision.
- Reporting. The buyer generally files Form 8288 and pays the withheld tax by the 20th day after the transfer. The IRS stamps copy B of Form 8288-A and sends it to the seller, who claims the credit on a U.S. income tax return.
| California (Form 593) | Federal (FIRPTA) | |
|---|---|---|
| Who it applies to | All sellers, resident or not, unless exempt | Foreign sellers only |
| Standard amount | 3 1/3% of the sales price, or the gain election | 15% of the amount realized |
| Price threshold | Not required at $100,000 or less | None required at $300,000 or less if the buyer will live there; 10% up to $1,000,000 |
| Reduce it by | Certifying an exemption on Form 593 | An IRS withholding certificate (Form 8288-B) |
| Paid over | By the 20th of the month after closing | Within 20 days after the transfer |
| Get it back by | Filing a California return | Filing a U.S. return with Form 8288-A |
A foreign seller can owe both on the same sale, so a 15% federal and a 3 1/3% state withholding can come out of one set of proceeds.
What to do before you list
- Gather your purchase records and improvement receipts so your adviser can estimate basis and gain.
- Ask your CPA whether you qualify for an exemption, and whether the gain election would lower the withholding.
- If you are a foreign person, or hold title through a foreign entity, raise FIRPTA at the start; a withholding certificate application takes time.
- If you plan a 1031 exchange, line up the intermediary before closing so the sale is set up as an exchange.
- Tell escrow early which exemption you expect to claim, and return Form 593 well before closing.
Diamond may refer you to partners we work with; you’re free to choose any provider. Executors and trustees selling inherited property can find the extra steps in our probate and trust sales guide.
Questions people ask
What is Form 593 in California?
The FTB form used to report California income tax withholding on a sale of California real estate, and to certify any exemption. Escrow prepares it, the seller signs it, and a copy goes to the FTB with any amount withheld.
How much is California real estate withholding?
3 1/3% of the sales price by default. Alternatively, the seller can elect withholding on the estimated gain at the maximum rate, 12.3% for individuals. No withholding is required when the sales price is $100,000 or less.
Do I pay California withholding when I sell my primary home?
Usually not. A home that qualifies under IRC Section 121, or that was last used as your principal residence, is exempt if you certify it on Form 593 before closing.
Is Form 593 withholding an extra tax?
No. It is a prepayment of your California income tax on the sale. You claim it as a credit on your California return and get back any overpayment after the FTB processes the return.
Can I get the withholding back from escrow?
No. Once the sale closes, the FTB says amounts withheld can be recovered only by claiming them as a credit on your tax return.
Does California withhold on a 1031 exchange?
Not at the initial transfer. Withholding applies if you receive more than $1,500 in cash or other property, and if the exchange fails the intermediary withholds 3 1/3% of the sales price.
Does FIRPTA apply in California?
FIRPTA is federal, so it applies to foreign sellers anywhere in the U.S., including California. The buyer generally withholds 15% of the amount realized, with exceptions and a reduced 10% rate for some residence purchases.
I’m not a California resident. Does withholding still apply?
Yes. The FTB applies the same rules to residents, nonresident individuals and non-California entities, and you generally file a California nonresident return to claim the credit.
This is general information, not tax advice; talk to a CPA or California tax adviser about your situation.
If you’re planning a sale of a second home, rental or inherited property, we can help you line up the timing, escrow and paperwork before you list. Start with our seller services.
Sources & notes
- Franchise Tax Board: Publication 1016, Real Estate Withholding Guidelines (rev. 02/2026)
- Franchise Tax Board: 2026 Instructions for Form 593
- California Public Law: Revenue and Taxation Code section 18662
- Cornell Law School LII: 26 U.S. Code 1445, withholding of tax on dispositions of U.S. real property interests
- Internal Revenue Service: FIRPTA withholding
- Internal Revenue Service: Exceptions from FIRPTA withholding
- Internal Revenue Service: Reporting and paying tax on U.S. real property interests
Last reviewed October 2026 by Matthew Martinez.
