CA Form 593 Instructions: Exemptions, Filing, and Withholding Credit

California Form 593, the Real Estate Withholding Statement, is filed with the Franchise Tax Board after any sale or transfer of California real property with a sales price above $100,000. It reports and remits an advance payment toward the seller’s California income tax, calculated by default at 3⅓% of the total sales price. The escrow or title company handling the closing usually prepares the form, withholds from the seller’s proceeds, and sends the payment to the FTB by the 20th day of the month after escrow closes.

When Form 593 Is Required

Under California Revenue and Taxation Code Section 18662, withholding applies to every transfer of California real property when the sales price exceeds $100,000.¹ Real property includes land, buildings, easements, and interests held by someone else. A 1031 like-kind exchange counts as a transfer for these purposes, though the exchange itself has its own exemption rules.

Withholding is not required when:²

The sales price is $100,000 or less.
The property is transferred through foreclosure.
The seller is a bank acting as a trustee (other than under a deed of trust).
The seller certifies a full exemption in Part III of the form.

The buyer is legally responsible for making sure withholding happens, but that duty is almost always carried out by the Real Estate Escrow Person (REEP), meaning the title or escrow company managing the closing. The REEP must notify the buyer of the withholding obligation in writing.¹ Withholding still applies even if the seller does not provide a tax identification number.

Full Exemptions in Part III

Part III lists nine certifications a seller can use to claim a complete exemption. Check every box that applies and sign under penalty of perjury. The most commonly used exemptions:¹

Principal residence (Line 1). You owned and lived in the property as your main home for at least two of the five years before the sale. Under IRC Section 121, this lets you exclude up to $250,000 of gain, or $500,000 if married filing jointly, from income entirely. The two-year rule has exceptions for job relocation, health reasons, and unforeseen circumstances such as divorce or job loss.³

Last used as principal residence (Line 2). No withholding is required if the most recent use of the property was as your main home, even after you moved out. A vacation home or rental that you previously lived in does not qualify; the last use must have been as your primary residence.

Loss or zero gain (Line 3). If the sale proceeds are less than or equal to your adjusted basis, you can certify that the transaction produces no taxable gain. You must complete Part VI and show a loss or zero gain on line 28. Feeling like you are selling for less than the property is worth is not enough; the math has to support it.

Involuntary conversion (Line 4). The property was taken through condemnation or eminent domain, or destroyed by disaster, and you plan to replace it.

If only a portion of the property qualifies as your principal residence, such as when you lived in one unit of a duplex and rented the other, a second Form 593 must be completed for the non-qualifying portion.

The Alternative Withholding Calculation

When no full exemption applies, the default withholding is 3⅓% of the total sales price. On a property with a small gain relative to its price, that default can be far more than the actual tax owed. Part VII lets sellers elect to base withholding on their estimated gain instead.¹

First complete Part VI to calculate estimated gain or loss on line 28. Then multiply that gain by the rate matching your filing type:

Individual: 12.3%
Corporation: 8.84%
S Corporation: 13.8%

The result goes on line 29. Compare it to 3⅓% of the full sales price on line 30. If the alternative calculation is lower, check the appropriate box in Part VII and use that smaller amount as the withholding on line 37. This election is especially valuable for sellers who have owned a property for decades, where the sales price is high but the taxable gain is modest relative to basis.

Information to Gather Before Starting

Full legal name and current mailing address for each seller, buyer, and the remitter.
Tax identification numbers. Individuals use an SSN or ITIN. Entities use a Federal Employer Identification Number, California Corporation number, or California Secretary of State file number. If a number has been applied for but not received, enter “Applied For” and attach a copy of the federal application.¹
Transfer date, typically the date escrow closes.
Total sales price (the gross amount).
Adjusted basis records if claiming a loss exemption or using the alternative calculation: original purchase price plus improvements, minus depreciation. Keep those records for at least five years.

Completing Form 593 Part by Part

The 2026 version has seven parts across three sides.

Part I — Remitter Information

The remitter is the party sending the payment to the FTB, usually the escrow or title company. Enter the remitter’s business or individual name, identification number, and address. For an entity, use the business FEIN or California identification number, not an employee’s personal information.¹

Part II — Seller/Transferor Information

Enter the seller’s name, mailing address, and identification number. Use either a business name or an individual name, not both. For nongrantor trusts, enter the trust’s name and its own FEIN rather than the trustee’s personal details.²

Parts III and IV — Exemption Certifications

Part III covers the nine full-exemption boxes described above. Part IV is used only when nothing in Part III applies and handles situations that may partially or fully exempt the sale, such as a like-kind exchange (Line 10) or an installment sale (Line 11). If nothing in either Part III or Part IV applies, check Line 12 in Part IV to indicate that withholding is required at the standard rate.¹

Parts V, VI, and VII — Buyer, Computation, and Withholding Amount

Part V captures the buyer’s name and identification number. For installment sales, it also records the terms of the promissory note and the buyer’s acknowledgment that they will withhold on future payments. Part VI is the gain or loss worksheet supporting a loss exemption or the alternative calculation. Part VII is where the final withholding amount lands, either 3⅓% of the sales price or the alternative calculation amount, whichever the seller elected.¹

The seller must sign and date the perjury statement on Side 3 before escrow closes for any exemption or reduced calculation to be valid. On a traditional (non-installment) sale, the buyer does not need to sign. Electronic signatures, including DocuSign, are accepted.

Filing Deadline and Where to Send Payment

Form 593 and the withholding payment are due by the 20th day of the calendar month after the month escrow closed. A sale closing March 10 means everything is due by April 20.¹

The remitter submits the original Form 593 with Form 593-V (the Payment Voucher for Real Estate Withholding) and the withholding payment. Pay by check with the voucher or electronically through the FTB’s Web Pay system. Form 593 can also be filed electronically using the FTB’s Secure Web Internet File Transfer (SWIFT) system, but even then Form 593-V still travels by mail with the payment.¹

The remitter must also give a copy of Form 593 to the seller by the same 20th-day deadline. The seller needs that copy to claim the withholding credit.

Installment Sales

When the buyer pays over time, the withholding rules split into two phases. During escrow, the REEP withholds 3⅓% of the down payment (or the alternative amount if elected) and submits it with Form 593-V just like a regular sale.⁴

After escrow closes, the buyer takes over. On each installment payment the buyer withholds on the principal portion only; no withholding is required on the interest. The withholding uses the same method (sales price or alternative calculation) certified on the original Form 593. Each payment’s withholding is due to the FTB by the 20th of the month following the payment, submitted with its own Form 593 and Form 593-V. On the final payment, write “Final Installment Payment” at the bottom of Form 593.⁴

1031 Like-Kind Exchanges

A sale that is part of a tax-deferred exchange under IRC Section 1031 is exempt from withholding at the time of the initial transfer. Certify this on Line 10 of Part IV. Both simultaneous and deferred exchanges qualify.¹

Two situations still trigger withholding:

Boot exceeding $1,500. If the seller receives cash or other non-like-kind property worth more than $1,500, the REEP or Qualified Intermediary must withhold on that amount.
Failed exchange. If the exchange falls through or does not qualify for nonrecognition treatment, the intermediary must withhold 3⅓% of the full sales price.

Sellers who complete a 1031 exchange must also file Form FTB 3840, California Like-Kind Exchanges, as an annual information return.¹

Claiming the Withholding Credit on Your California Return

The withholding is not a tax you lose. It is a prepayment credited back when you file your California return.⁵

Report the sale on your return and enter the amount from Form 593 line 37 as withholding. The return depends on your filing type:

Individuals: Form 540 (residents) or Form 540NR (nonresidents and part-year residents)
Trusts and estates: Form 541
Corporations: Form 100 or Form 100S
Partnerships and LLCs: Form 565 or Form 568

Attach a copy of Form 593 to the front of the return. If the withholding exceeds your actual tax liability, the difference comes back as a refund.

Correcting a Filed Form 593

Only the REEP can file an amended Form 593. The seller cannot file one independently, so if you are the seller and spot an error, contact the escrow company that handled the closing.⁵

To amend:

Complete a new Form 593 using the same taxable year version as the original.
Check the “Amended” box in the upper left corner.
Enter all the correct information. Do not use negative numbers.
Attach a letter explaining what was wrong and what changed.
Mail the amended form and letter to the FTB at the address in the form instructions.
Provide a copy to the seller.

An amended form cannot cancel a withholding amount after escrow has closed. Once the money reaches the FTB, the seller can only recover it by claiming the credit on the tax return. If you filed using the wrong year’s version, call the FTB’s Withholding Services and Compliance line at 888-792-4900.⁵

Penalties and Interest

Different failures fall on different parties.

Late or Incorrect Filing

For taxable years beginning on or after January 1, 2026, the penalty for filing a late or incorrect Form 593 is calculated per seller:¹

1 to 30 days late: $60
31 days to 6 months late: $130
More than 6 months late: $340

If the FTB determines the failure was intentional, the penalty jumps to the greater of $680 or 10% of the required withholding amount.

Failure to Withhold

A REEP that fails to notify the buyer of the withholding requirement faces a penalty of the greater of $500 or 10% of the required withholding. The same penalty applies to a buyer who was notified but did not withhold.¹

False Exemption Certificates

A seller who knowingly signs a false exemption certification faces the steepest consequence: a penalty of the greater of $1,000 or 20% of the required withholding amount.¹

Interest on Late Payments

Interest accrues on any withholding payment received after the due date, from the original deadline until the FTB receives the money. For the period through June 30, 2026, the FTB charges 7% annual interest on underpayments.⁶

1
Franchise Tax Board. 2026 Instructions for Form 593 Real Estate Withholding Statement
2
Franchise Tax Board. Real Estate Withholding
3
Office of the Law Revision Counsel. 26 USC 121 Exclusion of Gain From Sale of Principal Residence
4
Franchise Tax Board. Real Estate Installment Sales
5
Franchise Tax Board. 2024 Instructions for Form 593 Real Estate Withholding Statement
6
Franchise Tax Board. Interest and Estimate Penalty Rates