CA Sales Tax
My boss is selling his home and was suprised to see the new CA sales tax on his HUD statement and has asked me to do a little research for him
As of this year CA charges a 3% sales tax for property sales. This is about as much as I know, so our questions are as follows:
1. Presumably this is charged to the 'seller' rather than the'buyer''. Is this negotiable?
2. Is the 3% only on the capittal gains or on the entire sale price?
3. Are there any tricks you can do in the contract to reduce the amount paid in the sales tax?
Thanks,
Robert
[addsig]
It is a prepaid tax on your capital gains. It doesn't apply if its your primary residence for the last 2 of 5 years, if the proceeds to going to a 1031 accomodator or if the property is owned by a corporation. I have seen people change title into the corps name or LLC to avoid this tax with holding. Depending on his tax bracket, he may get some or all of this money back after tax returns are completed. Hope this helps
Are you sure we're talking about the same thing here? We're not talking about capital gains tax, but the 3% CA sales tax.
Thanks,
Robert
The form is 593-C Real Estate Withholding Certificate for Individual Sellers, it instructs escrow to withhold 3 1/3 percent of total sales price. It is not a sales tax, although it is connected with the sale of the property. A copy gets sent to the California Franchise Tax Board. A copy of this form is to be sent in with your California Tax return. There are no sales taxes that I have come across in real estate in CA, beyond this with holding. I am also subject to this tax on a property I am flipping. I will just not send in any more state money as they will already have it. You might want to call your escrow officer if you have not received this form yet.
Thank you for your help and time with further clarification. Don't mean to doubt you, just needed to be sure.
Robert
[addsig]
no problem, glad I could help
Yup, it's the stupidest tax I have ever run into. It was passed before the CAR even knew about it. The tax is based on SALES PRICE, not profit. How dumb is that?
Anywho, if he's lived there 2 of the last 5 years, there is no withholding. If he hasn't, just put it in a corporate name and they can't hold it. Don't let them hold your money for free all year. That's what the state is trying to do. Good luck!
Diane