The closing entity may withhold up to what percentage of the sales price for a non-resident seller?

The closing entity may withhold up to what percentage of the sales price for a non-resident seller?

• A. 1%
• B. 2%
• C. 3%
• D. 5%

Answer: (B)

Colorado requires withholding on the sale of real property by a nonresident to ensure the state collects the tax due. The closing entity (such as the title company or escrow agent) may withhold up to 2% of the gross sales price from the proceeds paid to the nonresident seller and send that amount to the Colorado Department of Revenue. This acts as a prepayment toward the seller’s Colorado income tax, with the final tax calculated when the seller files their state return. If the seller can provide the proper documentation for an exemption or a reduced withholding, the amount withheld can be less or waived. In practice, the typical withholding percentage is 2%.

Colorado requires withholding on the sale of real property by a nonresident to ensure the state collects the tax due. The closing entity (such as the title company or escrow agent) may withhold up to 2% of the gross sales price from the proceeds paid to the nonresident seller and send that amount to the Colorado Department of Revenue. This acts as a prepayment toward the seller’s Colorado income tax, with the final tax calculated when the seller files their state return. If the seller can provide the proper documentation for an exemption or a reduced withholding, the amount withheld can be less or waived. In practice, the typical withholding percentage is 2%.