Effective January 1, 2009
The purpose of this letter is to inform you of a law that passed in the Alabama Legislative Session in 2008. This is not a new tax, rather a new collection mechanism to collect capital gains taxes more efficiently. It will require closing agents with title companies and attorneys who close real estate transactions to collect the withholding of income tax on the sale of property and “related tangible personal property” by non-residents of the State of Alabama at the time of closing.
The Act requires an individual buyer to withhold 3% and it requires a buyer in a corporation or LLC to withhold 4% of the sales price from the seller who is a non resident of Alabama and remit it to Alabama Department of Revenue. The sales price threshold is $300,000 and above beginning January 1, 2009. The determined amount will be reflected on the HUD Statement at the time of closing. The seller may sign and affidavit of Seller’s gain and if the gain recognized on the sale is less than the purchase price, and the seller provides the buyer with an Affidavit of Seller’s Gain form, the buyer may withhold 3 or 4 percent of the amount of the gain. For your convenience the required affidavit forms are enclosed. You may also go to www.revenue.alabama.gov.
The closing agents and attorney’s who close the real estate transaction will be responsible for the proper affidavits being signed at the closing and will remit the taxable amount to the Alabama Revenue Department. Your Meyer agent will also provide the seller with the information provided by the Alabama Revenue Department at time of listing and will inform the buyer as to requirements.
We trust this information will be helpful and will help avoid any delays in closing due to the collection of capital gains taxes and the forms required by law in the State of Alabama. If you have questions our agents and brokers will help where ever we can.
The Powell Team
Century 21 Meyer Real Estate