CA Form 593: Withholding Rates, Exemptions, and Penalties

California Form 593 is the Franchise Tax Board form used at the close of any California real estate sale to either certify that the seller is exempt from state withholding or to calculate the tax that gets held back from the seller’s proceeds. It comes into play whenever the total sales price is more than $100,000, and it applies to sales, transfers, exchanges, and easements involving California real property.¹ The withheld amount is a prepayment of the seller’s California income tax for the year of the sale, not an extra tax.

Who Actually Handles the Form

The legal duty to withhold sits with the buyer. In almost every deal, though, the Real Estate Escrow Person (REEP), typically the title or escrow company running the closing, performs the withholding on the buyer’s behalf.² If no escrow is involved, the buyer files directly. The form itself has a box for the remitter to identify whether they are an escrow or title company, an intermediary, or the buyer.

Each seller gets their own Form 593. Married co-owners or registered domestic partners who plan to file a joint California return can share one; unrelated co-owners each file separately, each reflecting their ownership percentage. The FTB assumes equal ownership unless separate forms show a different split.

Exemptions That Eliminate Withholding

Part III of the form lists the full exemptions. When one applies, the seller signs before escrow closes and nothing is held back. Miss that deadline and the REEP has to withhold anyway, even if you would have qualified.³

Principal Residence

The most common exemption is for a primary home. You qualify if you owned and lived in the property as your principal residence for at least two of the five years before the sale date.⁴ The ownership and use years don’t need to overlap and don’t need to be the most recent two. Military members on qualified extended duty get a ten-year lookback instead of five.³

Loss or Zero Gain

If the sale will produce a loss or break even, no withholding is required. You have to prove it by completing the gain-or-loss calculation in Part VI, showing that your adjusted basis equals or exceeds the sale price minus selling expenses.³ Previously deferred passive activity losses tied to this property count. Losses from other properties, capital loss carryforwards, and net operating losses do not.²

Other Full Exemptions

Withholding is also waived when:

The total sales price is $100,000 or less.
The property is being foreclosed on through a power of sale, a court decree, or a deed in lieu of foreclosure.
The seller is a tax-exempt entity under California or federal law, such as a charity, religious organization, IRA, or qualified pension plan.
The seller is a corporation. S corporations still have to withhold on nonresident shareholders.

Calculating How Much Gets Withheld

When no full exemption applies, the remitter has two options.

The Standard Method: 3⅓% of the Sales Price

The default rate is 3⅓% (0.0333) of the total sales price.² On a $750,000 sale, that’s roughly $24,975 held back at closing. There’s no calculation required from the seller, which is why it’s the automatic fallback if the alternative section isn’t completed.

The Alternative Method: Based on Actual Gain

The standard rate can dramatically overstate the tax on a low-gain sale, and long-held properties with a high basis are the classic example. The alternative calculation, done in Part VI, applies the maximum California tax rate for your entity type to your estimated gain instead of the full sales price.⁵

The 2026 rates by entity type are:

Individual: 12.3%
Trust (grantor or nongrantor): 12.3%
Non-California partnership: 12.3%
Corporation: 8.84%
Bank or financial corporation: 10.84%
S corporation: 13.8%
Financial S corporation: 15.8%

Take the same $750,000 sale with a $600,000 adjusted basis. An individual seller’s estimated gain of $150,000 at 12.3% comes to $18,450 withheld, rather than $24,975 under the standard method. Money that isn’t withheld stays with you until you file your return.

1031 Exchanges and Installment Sales

Part IV of the form handles two transaction types that don’t fit the ordinary framework.

Like-Kind (1031) Exchanges

If you’re swapping California property for qualifying replacement property under IRC Section 1031, the initial transfer is exempt. You certify this on Line 10 of Part IV. If you receive cash or non-like-kind property (boot) exceeding $1,500, the remitter must withhold 3⅓% on that boot amount, and you can elect the alternative calculation on it.² If the exchange falls through or fails to qualify for nonrecognition treatment, the intermediary withholds 3⅓% of the full sales price.

Installment Sales

When at least one buyer payment lands in a tax year after the sale, the REEP reports the transaction as an installment sale on Line 11 of Part IV. Withholding then works this way:

Down payment at closing: the REEP withholds 3⅓% of the down payment and sends it to the FTB along with a copy of the promissory note.
Subsequent payments: the buyer withholds 3⅓% of the principal portion of each payment and files a current-year Form 593 and 593-V with each remittance. The seller does not need to sign the later forms.

Sellers who don’t want the buyer withholding on every future payment can elect out by filing a California return that reports the entire gain from the sale, then submitting a written request to the FTB to release the buyer from withholding on the remaining installments.⁶

Trusts, Estates, and Co-Owners

The name and identification number on the form depend on how title is held.

A grantor trust, the type most people use for estate planning, is disregarded for tax purposes. Complete Form 593 under the grantor’s name and Social Security number, not the trust’s, and the grantor claims the withholding on their individual return.⁶

A nongrantor trust, which includes most irrevocable trusts, is its own taxpayer. Use the trust’s name and its federal employer identification number. If the FEIN hasn’t come through yet, leave that field blank and contact the FTB’s Withholding Services once it arrives.⁶

Estates follow the same withholding rules and can claim the principal residence exemption if the property was the decedent’s principal residence.²

Filing Deadline and Method

The remitter combines the completed Form 593 with Form 593-V (the payment voucher) and submits both to the Franchise Tax Board by the 20th day of the calendar month after the month escrow closed.⁶ A March 8 closing has an April 20 deadline. Exempt transactions still require the form by the same date.

Form 593 can be filed electronically through the FTB’s Secure Web Internet File Transfer (SWIFT) system; the payment and Form 593-V go by mail separately. Electronic signatures, including DocuSign, are accepted. After filing, the REEP must give the seller a copy of the completed form. Hold onto that copy. You’ll need it at tax time.

Penalties for Getting It Wrong

Penalties fall on whoever dropped the ball, and they stack across parties.

On the Remitter or Buyer

If a REEP fails to notify the buyer in writing about the withholding requirement, the penalty is the greater of $500 or 10% of the required withholding. If the buyer is properly notified but doesn’t withhold, the same penalty applies to the buyer.

Late or incorrect Form 593 filings carry per-seller penalties under the 2025 instructions:

1 to 30 days late: $40
31 days to 6 months late: $80
More than 6 months late: $130
Intentional disregard: $330 or 10% of the required withholding, whichever is greater

The FTB has announced that penalties for failure to file information returns increased for taxable years beginning on or after January 1, 2026.⁷ Failing to give the seller a complete copy by the due date carries up to $130 per form, or $330 (or 10% of the required withholding) for intentional failures.⁶

On the Seller

A seller who knowingly signs a false exemption certificate faces a penalty of $1,000 or 20% of the required withholding, whichever is greater.⁶ The FTB can pull escrow records to verify a claimed exemption, so falsely certifying a principal residence exemption is not a workable shortcut. Interest also accrues on any late withholding from the due date until paid. The FTB’s personal income tax interest rate through mid-2026 is 7%.⁸

Claiming the Withholding on Your Tax Return

Because the withheld amount is a prepayment, you settle up when you file. Residents use Form 540; nonresidents and part-year residents use Form 540NR. Report the actual gain or loss on the sale, calculate your total tax, then enter the withholding amount from your Form 593 copy on Line 73 of Form 540 and attach the Form 593 copy to the front of the return.⁹ If the withholding exceeds your actual tax, the difference comes back as a refund. If it falls short, you pay the balance with the return.

This is where the alternative calculation matters most. Using it typically brings the prepayment closer to your real liability, so less of your sale proceeds sit with the FTB between closing and filing season.

1
Franchise Tax Board. Real Estate Withholding
2
Cornell Law School. California Code of Regulations Title 18 18662-3 – Real Estate Withholding
3
Franchise Tax Board. FTB Publication 1016 Real Estate Withholding Guidelines
4
Franchise Tax Board. Income From the Sale of Your Home
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Franchise Tax Board. 2026 Form 593 Real Estate Withholding Statement
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Franchise Tax Board. 2025 Instructions for Form 593 Real Estate Withholding Statement
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Franchise Tax Board. 2026 Instructions for Form 593 Real Estate Withholding Statement
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Franchise Tax Board. Interest and Estimate Penalty Rates
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Franchise Tax Board. 2025 Personal Income Tax Booklet California Forms and Instructions 540