Colorado 2% Real Estate Withholding Tax
When selling a home or condo in Summit County, Colorado, out of state sellers are subject to the 2% withholding tax. This pertains to properties in Breckenridge, Keystone, Frisco, Silverthorne, Dillon and Copper Mountain.
1099 Certification Process
The "Certification for No Information Reporting on the Sale or Exchange of a Principal Residence" is a form that may be completed by the seller of a principal residence. This form will assist the Title Company in determining whether the sale or exchange of the property should be reported to the IRS on Form 1099-S.
A copy of the 1099 certification form is presented to the sellers at closing. The first criteria are that the sales price for an individual seller must be $250,000 or less in order to qualify. For a married couple, the sales price must be $500,000 or less and a certification must be obtained by both sellers.
The next criteria in order to qualify for this exemption from reporting is that the seller must review Part II "Seller Assurances" 1 through 6. If the seller(s) cannot under penalty of perjury check all six assurances, the title company is required to report the sales price of the property on Form 1099-S. This form will be sent out to the sellers in January of the following year.
Your Land Title Sales Representative can provide you with a complete copy of the Certification form if you would like to review the above assurances.
In the event the Certification can be signed by the Sellers, Land Title will still need the seller(s) forwarding address filled out on an informational form.
If the property sales price is in excess of $250,000 for an individual or $500,000 for a married couple, regardless of the amount of gain, the IRS requires the sale to be reported on Form 1099-S.
Additionally, the certification rule applies only to principal residences. Corporations, limited liability companies, partnerships, limited liability partnerships, and trusts in general do not qualify to own a principal residence.
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.
Any sale that shows a non-Colorado address for the transferor may be subject to this withholding.
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.
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 nonjudicial foreclosure or by deed of lieu of foreclosure; or
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 sellers 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.
If this is a short sale or the seller is not receiving any proceeds, then a settlement statement will be attached on page 2 of the form.
If this is a short sale or the seller is not receiving any proceeds, then a settlement will be attached to the DR1083 to show "No Net Proceeds".
By law, all completed forms are to be sent in to the Colorado Department of Revenue within 30 days of the closing date.
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% Colorado real estate withholding tax.
This information is subject to change, errors and omissions. Bret and Meredith Amon are not liable. It is strongly advised for consumers to engage in a professional attorney or tax accountant.