Selling Investment Property in Georgia: Are Your Sellers Subject to Georgia Withholding Tax?
If your seller is not a Georgia resident and is not selling their principal residence, they may be subject to Georgia withholding tax. Georgia withholding tax equals 3% of either the seller’s net proceeds or the sales price of the property. Closing attorneys are required to collect this tax at closing if the net proceeds/sales price is greater than $20,000.00. In order to avoid having to withhold tax based on the full sales price, all sellers who may be subject to Georgia withholding tax are asked to fill out an affidavit stating their net proceeds from the sale. Net proceeds are calculated by subtracting the seller’s cost basis (amount seller paid) and “costs of sale” from the sales price.
Net Proceeds = sales price - cost basis (amount seller paid) – costs of sale
A tax advisor can best help your seller determine what constitutes their “costs of sale” and we are always happy to provide your seller with the affidavit in advance of closing so that they may accurate determine their net proceeds. Please be aware - if the seller does not complete this affidavit, tax will be withheld on the full sales price of the property. Bottom line: make sure that your out of state sellers are aware of this requirement in advance so that may better prepare for the tax consequences at closing!
Renee Dillon
Neel & Robinson Attorneys at Law, LLC
