California Form 593: 3.33% on an $800,000 Sale Means $26,640 Held — Here's the Math

When you sell California real estate, the default withholding is 3 1/3 percent (3.33%) of the gross sales price, remitted to the Franchise Tax Board on Form 593. On an $800,000 sale that's $26,640 held back at closing. It's not a tax — it's a prepayment you reconcile (and usually largely recover) when you file your California return.

That single number surprises almost everyone who isn't ready for it. The 3.33% comes off the top line — the full sales price — not your profit, and not your net proceeds after the mortgage payoff. If your gain is modest, the FTB can end up holding far more than you'll ever owe, until you file and claim it back. Below, I walk a full $800,000 sale step by step, show you the two ways the withholding can be calculated, and explain exactly how the money comes back on your Form 540NR.

The default rule: 3.33% of the total sales price

California Revenue & Taxation Code section 18662 requires withholding on the disposition of California real property. The standard amount is 3 1/3% (.0333) of the total sales price, unless the seller elects the alternative gain-based calculation (more on that below) or qualifies for a full exemption. The buyer or, in practice, the escrow/settlement agent withholds the amount at closing and remits it to the FTB with Form 593. (Source: FTB, 2026 Instructions for Form 593; FTB, Real estate withholding.)

Two points trip people up immediately:

• It's on the price, not the profit. 3.33% is applied to the gross sales price, period. Whether you made $300,000 or broke even, the default math is the same.
• It's on the price, not the net. If you have a large mortgage to pay off, the withholding still comes off the full price first. On a $1,500,000 sale with a $1,200,000 loan payoff, escrow withholds 3.33% of $1,500,000 — not 3.33% of the $300,000 you walk away with.

Note the FTB rounds the rate as "3 1/3%." On a clean $800,000 figure, 0.0333 gives exactly $26,640. Some escrow software uses the full 0.033333… fraction, which on $800,000 would be about $26,667; the difference is rounding, and the official statement amount controls. Always read the actual figure on your completed Form 593.

The $100,000 exemption: below this, no withholding at all

If the total sales price is $100,000 or less, California real estate withholding is not required and the exemption is automatic — no Form 593 calculation is needed for the price threshold itself (other exemptions, like a true principal residence, still require the form to certify them). This is a hard line at the price level, not the gain level. (Source: FTB, 2026 Instructions for Form 593.)

Don't confuse California's $100,000 price exemption with the federal FIRPTA $300,000 personal-use-residence exemption — they are different rules from different governments, and a sale can be exempt from one but not the other.

When to use the alternative gain-based calculation

You are not stuck with 3.33% of the price. The seller may elect an alternative withholding calculation based on the gain required to be recognized from the sale. Instead of a flat percentage of the price, you compute your gain and apply the top tax rate for your filer type. The 2026 rates are:

Rates per the FTB Form 593 alternative-calculation election. Verify your current-year figures on the official 2026 Form 593 instructions before relying on them.

The rule of thumb: elect the gain method when your gain is small relative to the price — because 12.3% of a small gain can be far less than 3.33% of a large price. When your gain is large relative to the price (you bought cheap, decades ago), the default 3.33% of price is usually the smaller number, so leave the election alone.

Form 593 must be completed before close — not after

Form 593 is the seller's certification of the property, the sales price, any exemption claimed, and the withholding amount (default or elected gain method). The settlement agent provides it for the seller to review, complete, and sign at or before closing so the correct dollar amount is withheld out of proceeds. The completed original, with Form 593-V and the payment, is then remitted to the FTB by the 20th day of the calendar month following the month escrow closes. (Source: FTB, 2026 Instructions for Form 593.)

Why timing matters: if you want the gain-based election or a valid exemption, it has to be on the signed form before the money moves. Show up to closing without your gain figures and escrow will default to 3.33% of the full price — and unwinding that means waiting to file your return to get the excess back. Decide your method, and gather your basis records, well ahead of the closing date.

What you'll need ready before closing

• Your original purchase price and closing costs (to support basis).
• Records of capital improvements that increase basis.
• Depreciation taken if it was a rental (it reduces basis and increases gain).
• Your filer type (individual, trust, corporation, etc.) for the correct rate.
• A decision: default 3.33% of price, or elect the gain method.

How the withheld amount comes back: the 540NR credit

The withholding is a prepayment of your California income tax, not an extra tax. After year-end, escrow's copy of Form 593 documents how much was sent to the FTB on your behalf. You report the sale on your California return and claim the withholding as a credit:

• Nonresidents and part-year residents file Form 540NR (California Nonresident or Part-Year Resident Income Tax Return) and enter the real estate withholding from Form 593 in the payments/withholding section.
• If the credit (your $26,640) exceeds your actual California tax on the gain, the difference is refunded to you.
• If your actual tax is higher than what was withheld, you pay only the shortfall — the withholding still counts toward it.

So in Maya's first example, the $26,640 wasn't a cost — it was a deposit. Her real California liability on the gain determines what she keeps; the rest comes back as a refund when she files Form 540NR. (Source: FTB, Real estate withholding.)