Colorado 2% Withholding

Angie SpanglerBuy My House, Fort Collins Real Estate Update, Old Town Fort Collins, Sell My House

Colorado 2% Withholding (DR 1083)

In general, sales of Colorado real property valued at more than $100,000 and made by non-residents of Colorado are subject to a withholding tax in anticipation of any Colorado income tax that could be due on the gain of the sale. This law affects non-Colorado residents or those parties moving out-of-state and not purchasing another primary residence. The amount, if withheld, shall be the lesser of 2% of the sales price of the property or the net proceeds. If such withholding applies, the closer will also prepare a form 1079 for the seller to file with the Colorado Department of Revenue post closing to see if they qualify for a partial or full refund of the withholding.

However there are exceptions to this 2% withholding. Withholding shall not be made when:

  • 1. The selling price of the property is not more than $100,000
  • 2. The transferor is an individual, estate, trust, or partner and both the Form 1099-S and the authorization for disbursement of funds show a Colorado address for the transferor
  • 3. The transferee is a bank or corporate beneficiary under a mortgage or beneficiary under a deed of trust and the Colorado real property is acquired in judicial or non judicial foreclosure or by deed of lieu of foreclosure
  • 4. The transferor is a corporation incorporated under Colorado law or currently registered with the Secretary of State’s office as authorized to transact business in Colorado
  • 5. The title insurance company or the person providing the closing and settlement services, in good faith, relies upon a written affirmation executed by the transferor, certifying under penalty of perjury one of the following
    • a) that the transferor, if an individual, estate, trust or partner is a resident of Colorado
    • b) that the transferor, if a corporation, has a permanent place of business in Colorado
    • c) that the Colorado real estate property being conveyed is the principal residence of the transferor which could qualify for the rollover of gain provisions of section 1034 of the internal revenue code
    • d) that the transferor, if a partnership files an annual federal partnership return of income under section 6031 (a) of the internal revenue code
    • e) that the transferor will not owe Colorado income tax reasonably estimated to be due from the inclusion of the actual gain required to be recognized on the transaction in the gross income of the transferor
    • f) no net proceeds, there is no corresponding paragraph to sign. The seller’s settlement statement is sent out showing no proceeds to the seller.

    If the out-of-state resident can agree to an affirmation, they should sign on that corresponding paragraph on page 2 of the form with zero proceeds to be remitted to the Colorado Department of Revenue.

    If you know you have an out-of-state seller, it is important to contact your Closer so that the form and instructions for completing the form can be sent out well in advance of the closing. The seller can then consult their accountants if they have any questions as to the collection of the 2% withholding.

    Our highly experienced closing teams at Land Title strive to provide you a professional, friendly, thorough closing experience from the beginning through the end of the transaction & beyond should any questions arise post closing.
    Amy L. Zscheile, Licensed Closing Agent, Email, 970-267-5019
    Website

    Disclaimer: This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is distributed with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal or accounting advice or other expert assistance is required, the services of a competent professional should be sought.
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