La Quinta, CA
(760) 895-3516

Saturday, April 11, 2015

California 3-1/3% Withholding Tax from Canadian Sellers

QUESTION: We are a Canadian couple who has recently sold our vacation home in California. We noticed on the escrow statement that California has withheld 3-1/3% of the gross sales price. Can and how do we get this money back?

ANSWER: As a Canadian who owns real estate in California, you may be wondering what you need to do if you ever want to sell your U.S. property. I've discussed how to get your Federal withheld income tax refunded as a Non-resident alien, now we will have a look at how to get your California withheld tax back.

If you choose to sell your vacation home in the Golden State being a non-resident alien (Canadian resident), California withholds 3-1/3% of the gross sale price of your california real estate property, or 12.3% of the gain on the sale. The process of receiving your withholding tax back is somehwat simple.

First you will need your escrow closing statement. The form 593 is used if you sold the property as an individual. You will attach a form 593 to your California income tax return. This form will need to be signed when paper filing. You will enter the escrow number and date of closing along with some other information on the escrow closing statement. Remember, you cannot (at this date) e-file a 1040NR.

If you sold the property as a corporation or partnership, you will need to fill out a California form 592-b. Attach all supporting documents to the state return as well.

If the property that is being sold is owned by a husband and wife, each spouse should file their own return. Amounts are divided in half, so the CA withholding tax recovered will be half of the total amount withheld each.

I work with Canadians who need to file U.S. income tax returns to recover federal and state withholding tax. I can help you recover withholding taxes in any state. Please call BORDERS BOOKKEEPING in La Quinta, CA, which is in the Coachella Valley/Palm Springs, CA area.

(760) 895-3516