January 1, 2008 House Bill 2592 will go into effect. What does this mean? For the out of state seller it means less money in the short run. If an out of state seller sells an Oregon property after January 1, 2008 new legislation will require a mandatory withholding for income taxes.
The withholding will be from the seller's proceeds at the time of closing. The 2008 sales agreement will have text that pertains to this and the new law.
What to expect - from looking over the bill which can be viewed at http://www.leg.state.or.us/07reg/measpdf/hb2500.dir/hb2592.intro.pdf I see it as you should expect to have 4% of the net proceeds or 10% of the gain for taxable income. Obviously it is much more detailed than this, please do read the bill so you know exactly what to expect regarding your own sales in Oregon.
This law is over a year old now and it still poses a lot of questions - the one thing that both REALTORS® and Title and Escrow have to continue to explain is that this is a withholding and not a tax.
Wow, Thesa, something tells me you'll have a lot of California home owners suddenly claiming to live in Oregon.
Thesa, are they collecting up front instead of after.
I was not even aware of this law. I'm sure it has created a long list of questions. I have so much to learn.
:-) ~GBU~
Hi Thesa,
We've had almost of the same there here in CA for quite a while. It's calculated on the gross sales price, not equity. Similar to what Marchel said, it's an upfront collection in anticipation of taxes owed later.
Yeah, Lynda, but in CA the 3% tax collected by the Franchise Tax Board applies only to investors.
Hi Thesa, in Colorado we have a 2% withholding (based on the sale price) for out of state Sellers. They must file a Colorado state tax return in order to get any refund. It is also a way for the state to catch people who have been renting in Colorado but not filing a return on the money they make here! If the Seller is a foreign national the IRS requires even more to be withheld, and if it is not withheld, the Buyer is responsible for paying it!
2.5 % in Maine with held by buyer's attorney until it is shown no capital gains...
Hey Thesa! Haven't seen you around for a while! Hope you're doing well and just too busy to blog!
Thesa, sounds as though Oregon is trying to catch those folks who fail to file a return. Take their money up front, more than they'll owe, and they'll be filing that state return after all.
It probably wasn't as big a concern when the economy was good, and coffers flowing.
Keep that money coming in.