Massachusetts has adopted 830 CMR 62B.2.4, introducing new withholding requirements on the sale of real estate by non-residents when the gross sales price is $1,000,000 or more. These rules are designed to ensure proper collection of state taxes and will take effect for real estate closings on or after November 1, 2025
What Is 830 CMR 62B.2.4?
This regulation requires a withholding agent—often the closing attorney, escrow agent, or title company—to withhold a portion of sale proceeds at closing and remit it to the Massachusetts Department of Revenue (DOR). The withholding applies when the gross sales price meets or exceeds $1,000,000, and the seller is a non-resident.
Key Features and Requirements
- Effective Date: Applies to closings on or after November 1, 2025.
- Threshold: Gross sales price of $1,000,000 or more.
- Withholding Agent: Responsible party for withholding and filing—typically a closing attorney or title company. If no agent exists, the buyer assumes this role.
- Calculation Options:
- Default: Withholding based on gross sales price.
- Alternative: Seller may elect to withhold based on estimated net gain (gross price minus adjusted basis and sale-related expenses).
- Tax Rates:
- For personal income tax: 4% of gross price, or 5% of estimated net gain, plus 4% surtax on amounts exceeding surtax thresholds.
- For corporate excise tax: 4% of gross price, or 8% of estimated net gain.
- Transferor’s Certification: Must be completed by each seller at or before closing. It allows sellers to claim exemption, reduced withholding, or elect the alternative calculation.
- Filing and Remittance: Agent must file Form NRW and remit withheld taxes electronically via MassTaxConnect within 10 days of closing, even if zero withholding applies.
- Exemptions include full-year Massachusetts residents, pass-through entities, publicly traded partnerships, estates of resident decedents, corporations with MA business presence, exempt organizations, government entities, various financial institutions, and certain REITs—provided a Transferor’s Certification is submitted.
- Other Exceptions: Reduced withholding may apply in cases like sales where required withholding exceeds proceeds after debts, foreclosure sales, or involuntary conversions under IRC § 1033—if certified.
Why This Matters to Your Sale
- Significant Cash Flow Impact: Sellers may see sizable withholding at closing, especially for high-ticket properties.
- Planning Is Essential: Knowing whether you qualify for exemptions or wish to use the alternative net gain calculation can materially affect proceeds at closing.
- Increased Administrative Requirements: Transferor’s Certifications and Form NRW must be completed carefully and timely.
- Avoid Surprises: Non-residents, especially former MA residents or entities without a current MA presence, need proactive planning to manage tax and cash flow implications.
Professional Insight
As experienced CPAs, we know that at the time of closing, property sellers may not yet know the precise adjusted basis or net gain—making the gross-price withholding method the path of least resistance. However, electing the alternative method may yield substantial savings when properly supported. The Transferor’s Certification thus becomes a critical document, not only for withholding calculation but also for preserving your rights to exemptions or reductions.
For closing agents, understanding these updated rules is just as important. Failing to withhold, file, and remit properly can result in penalties and interest. Whether you’re a seller or agent, planning ahead with a tax advisor ensures smoother transitions and minimized financial risk.
Take Action Today!
Ensure compliance and support a smoother closing. We can help you:
- Evaluate whether withholding applies to your sale.
- Choose between gross-price or alternative calculation.
- Prepare and submit the Transferor’s Certification.
- File Form NRW and remit withholding through MassTaxConnect.
- Navigate potential exemptions or exceptions strategically.
Contact us at (401) 921-2000 or via our website to safeguard your real estate transaction and financial outcome.