Hello, Stephanie here with Truedoor Property Management. If you’re an out-of-state landlord with property in California, you might be aware of the 7% rent withholding requirement imposed by the state. But here’s the good news: there’s a way for you to potentially qualify for a waiver or reduced withholding amount. Today, we’re diving into this crucial topic that can help you keep more of your rental income and avoid the hassle of upfront withholding. So, if you’re a property owner living outside of California, this blog is a must-read. Let’s get started!
Understanding the 7% Withholding
Let’s begin by clarifying what the 7% withholding is all about. If you own rental property in California as a non-resident, the state mandates that property management companies withhold 7% of your rental income. This is done to ensure that the state receives its income taxes from non-resident property owners.
However, the good news is that you might be eligible for a waiver or a reduced withholding amount. The most common way to qualify for this benefit is by having filed tax returns in California within the last two years.
Qualifying for a Waiver
If you’ve been diligent about filing your California tax returns, the state may recognize you as a responsible taxpayer. In such cases, they might grant you a waiver or reduce the withholding rate. Getting a waiver is advantageous because it means you won’t have to part with that 7% of your rental income upfront. You won’t have to prepay your tax obligations, making it a more attractive option for many landlords.
How to Apply for a Waiver
To apply for a waiver, you’ll need to visit the California Franchise Tax Board website, which you can find at ftb.ca.gov. On their website, you can access Form 588, the Nonresident Withholding Waiver Request. This form is essential for requesting a waiver from withholding on your rental income.
We understand that the process can be confusing for some landlords. If you need assistance, don’t hesitate to give us a call. At Truedoor Property Management, we can walk you through the process and make sure you fill out the form correctly. Our team is here to provide the support you need in navigating this sometimes complicated procedure.
Seek Professional Guidance
It’s crucial to recognize that tax laws can be complex and are subject to change. We’re not attorneys, so it’s a wise move to consult with a tax professional or an attorney who specializes in California real estate tax matters. They can offer expert guidance through the process and ensure that you meet all the necessary requirements.
Thank you for joining me today as we explored this important topic for out-of-state landlords in California. If you found this blog helpful, don’t forget to like and subscribe for more valuable insights. Remember, at Truedoor Property Management, our goal is to help you make more money with less drama in your rental property investments. Until next time, I’m Stephanie, and we’re here to support you on your landlord journey.