South Carolina’s Withholding Tax for Out-of-State Sellers

by | May 29, 2015 | Legal Tips

If you are working with an out of state seller please be mindful that the Department of Revenue requires the closing attorney to withhold 7% of the net proceeds or of the gain, whichever is smaller.

There are several exemptions to the withholding requirement. The most common are the seller lived in South Carolina during the current calendar year and will be filing a South Carolina tax return; the seller did not recognize a gain on the sale of the house; or the seller is selling their primary residence and lived in the house 2 out of the last 5 years as their primary residence and their gain does not exceed the threshold amount ($250k for individuals or $500k for couples filing jointly).   If the seller does not meet these or the other exemptions, your seller would need to get with their tax advisor to determine the amount of the gain, if any.

As the real estate agent, please be sure to advise your out of state client upfront of the possible withholding requirement.  A good closing attorney will include information about withholding in their engagement letter.

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