Explanation of the exemption from withholding and the calculation of gain on the sale of real property in Georgia

1. ARE YOU A GEORGIA RESIDENT?
Residency is a matter of intent
Things that indicate residency:
• Driver’s License
• Car registration
• Voter registration
Physical presence is not necessarily the deciding factor:
• Students may live in one state for education but be a resident of another
state
• Military service personnel may work in a state in which they are not a
resident

2. WHY DOES GEORGIA RESIDENCY
MATTER IN THE SALE OF PROPERTY?
Taxes may be owed on the gain realized upon the sale of
property.
If the seller is not a resident of Georgia, there will be no state
tax return on which to report and pay the taxes on the gain.
The state collects a 3% withholding at closing to compensate
for this.

3. HOW IS THE WITHHOLDING
CALCULATED?

4. ARE THERE EXCEPTIONS?
A. $20,000 Threshold – Withholding is not required on transactions where the purchase price is less than
$20,000.
B. B. $600 Threshold – If the purchase price exceeds $20,000, the tax liability is less than $600, and the seller
signs an affidavit certifying the gain, the buyer will not be required to withhold.
C. C. Foreclosures – The buyer is not subject to the withholding requirements if the seller is a mortgagor
conveying the mortgaged property to a mortgagee in a foreclosure or in a transfer in lieu of foreclosure
with no additional consideration.
D. D. Federal and State Agencies – The transaction is not subject to the withholding requirements if the seller
or buyer is an agency of the United States or the State of Georgia, or a private mortgage insurance
company.
E. E. Composite Returns – If the seller is an entity which files a composite return and remits the tax on the gain
on behalf of its members, then the buyer is not required to withhold. 3
F. F. FNMA, GNMA, or FHLMC – The seller or buyer is the Federal National Mortgage Association, the
Government National Mortgage Association, or the Federal Home Loan Mortgage Corporation.
G. G. Tax Exempt Organization – The Seller is a tax exempt organization and the income from the sale is not
subject to federal or state income tax.
H. H. Insurance Company – The seller is an insurance company which pays tax on its premium income to
Georgia.
I. I. Like Kind Exchange – The transaction is a like kind exchange and all of the income from the sale is not
subject to federal or state income tax.

5. BIG TAKEAWAYS
• If the tax is not collected at closing, the state can enforce the
collection against the Buyer therefore Buyers and Sellers care about
this tax.
• The Listing Agent should ask whether the Seller is a Georgia resident,
particularly when the Seller is not located in the state.
• The Seller should provide the closing attorney with the gain
calculations to make the collection or show that the gain is
$20,000.00 or less and no collection is necessary.
• Any important questions regarding this tax should be directed to a
CPA or the Georgia Department of Revenue.