Real Estate Tax Info

 

NEW TAX WITHHOLDING REQUIREMENT
EFFECTIVE AUGUST 1, 2008

§40-18-86 Code of Alabama

1. The Alabama Legislature has enacted a new law that requires Buyers to withhold 3-4% of the proceeds from the sale or transfer of real estate by non-residents of the State of Alabama. The new law goes into effect August 1st and applies to transactions with a sales price of $800,000.00 and above.

2. This is not a new tax but a new collection mechanism approved by the Alabama Legislature. The money is required to be withheld by the Buyer in order to collect the capital gains tax owed by a non-resident seller to the State of Alabama.

3. The Alabama Department of Revenue has adopted interim guidelines with procedures, and forms, for the enforcement of the collection of the capital gains tax. Until January 1, 2009, only sales by non-residents of$800,000.00 and above are subject to the withholding requirement. After January 1st, sales by non-residents of $300,000.00 and above will be subject to the requirement.

4. All interested parties are urged to visit the Department of Revenue website http://www.revenue.alabama.gov/ for more information concerning this new law and compliance therewith. There are a number of exemptions to the law including sales involving a primary residence.

5. REMEMBER UNTIL JANUARY 1, 2009, THIS NEW LAW ONLY APPLIES TO SALES OR TRANSFERS BY NON-RESIDENTS WITH A PURCHASE PRICE OF $800,000.00 AND ABOVE. AFTER JANUARY 1, 2009, SALES BY NON-RESIDENTS OF $300,000.00 AND ABOVE WILL BE SUBJECT TO THE LAW.

6. Under the new law, the Buyer is liable for the capital gains tax owed by the seller if the tax is not withheld and timely remitted to the Department
of Revenue after the sale or transfer of property

 

For Additional Details and Specifics Concerning This New
Tax Withholding Law, Contact The Alabama Department
of Revenue at 334-242-1101 and/or Visit
www.alabama.revenue.gov.