Question:
“I’m going to be selling my rental and buying another using a 1031 exchange. A realtor told me that because it’s not my home, the state of California will withhold money from the sale for taxes. Is that correct?”
Answer:
That agent gave you some incorrect advice.
The state will require a 3 1/3% withholding UNLESS one of the following apply:
- You state that you’re selling your principal residence
- You’re selling for loss or zero gain
- You’re doing a 1031 exchange
So as you can see, you’re exempt under #3.
Note: I’m not a tax professional, so please verify with your favorite tax advisor.
