Withholding Tax on home sales over $1M
As 2025 got closer to the end of the year, real estate agents/brokerages were surprised with the announcement of a new law being implemented on Nov 1 regarding home sales over $1M in Massachusetts.
This had taken many by surprise, and the speed of implementation astounded many. Even up until 1 or 2 days prior to the implementation, attorneys were still awaiting forms from the Massachusetts state legislature that documented the changes, and the forms that needed to be completed on sales that happened after Nov 1.
More information has arisen since then, but typically the real estate market is very slow over the winter period, so it hasn’t impacted many people so far.
What does the Withholding tax cover?
From what we understand, the withholding tax is related to the capital gains tax that is applicable on a home sale and is normally addressed with the following year income tax return where federal taxes, along with state taxes are determined. What the state legislature is trying to protect against is residents moving out of state on the sale of their home, and when they file taxes in their destination state the federal and state component of the capital gain tax assessed on the sale is benefiting the destination state rather than Massachusetts. It applies to any home sold over $1M where the seller is going to be moving out of Massachusetts and is not a full year resident of the state, then a withholding tax on the sale of the home is going to be applied at closing. The withholding tax is going to be anywhere from 5-8% of the net value on the sale and has to be calculated by a CPA for the seller, that information passed to the closing attorney who then has to fill out a large number of forms, and then submit the withholding tax payable to the MA Department of Revenue.
Summary
To summarize:
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MA residents are exempt as long as they are an individual who will file a MA personal income tax return as a full year resident in the year the sale occurs and will represent that they will remain a resident after the sale occurs
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Seller must have been a resident as of Jan 1st of the year the sale occurs and must intend to remain a resident after the sale
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A ‘resident’ is someone living in MA for at least 180 days of the year.
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Seller will need to certify their status to the closing attorney of the home sale
For more information on this, and some exemptions to this law, go to https://www.mass.gov/info-details/withholding-requirement-sale-of-real-estate-by-non-residents
If you would like an estimate of what your home would sell for in today's market I would be more than happy to come by, have a look at your home, and then provide a CMA (comparative market analysis) which will provide you with an estimate of what your home should sell for, along with a marketing plan to get maximum exposure for your home