Am I Subject to Colorado’s Real Estate Withholding Tax?

An important consideration for Colorado’s nonresident owner/sellers of real estate in our state is the withholding tax that can be levied at the closing table. Colorado can collect a 2% tax on your real estate transaction if you are selling an “in-state” second home or investment property.

Who is Required to Pay:

Corporations that do not maintain a permanent place of business in Colorado and nonresident individuals, estates and trusts are subject to Colorado’s income tax withholding on the sales of Colorado real estate in excess of $100,000.

The withholding tax, if required, will be the smaller of:

• two percent (2%) of the sales price
• the net proceeds from the sale. (“net proceeds” means the net amount that would otherwise be due to the seller on the settlement sheet)

The tax is withheld at the time of closing by the title insurance company, its agent or any other person providing the closing services for the transaction. The tax is submitted to the Colorado Department of Revenue, where it will be credited to the seller’s income tax account as an estimated tax payment.

Who is Not Required to Pay:

If your real estate transaction enjoys the following attributes, then you are exempt from the Colorado 2% Withholding Tax when you sell your Colorado property.

• The selling price is less than $100,000
• The seller has a Colorado address
• The seller is a government agency
• The buyer of the property is a bank and the property was acquired by foreclosure