The Massachusetts Department of Revenue (DOR) has finalized regulation 830 CMR 62B.2.4, which establishes new rules for withholding on the sale of Massachusetts real estate by non-resident taxpayers. These rules will take effect for closings on or after November 1, 2025 and apply to transactions with a gross sales price of $1 million or more.
Key Highlights of the Regulation:
- Withholding Requirement: The withholding agent, typically the closing attorney or title company, must withhold 4% of the seller’s gross proceeds, unless the seller qualifies for an exemption or elects to withhold based on estimated gain.
- Exemptions: Certain sellers, such as Massachusetts residents, nonprofits, and qualifying pass-through entities, may avoid withholding if they provide a Transferor’s Certification with supporting documentation before closing.
- Filing Obligations:
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- Sellers must certify residency, exemption eligibility, or gain calculation in advance of closing.
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- The withholding agent must file Form NRW and remit payment to the DOR within 10 days of the sale, even if no tax is ultimately due.
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- Withholding agents are protected from liability if they rely in good faith on seller-provided certifications.
Why This Matters
These new rules have significant implications for non-resident individuals and entities selling high-value property in Massachusetts. Compliance with the certification and timing requirements is critical, and real estate practitioners should carefully review the changes to ensure smooth closings and proper tax treatment.
For more details, you can review the finalized regulation here: Massachusetts DOR – 830 CMR 62B.2.4.