Understanding the New Massachusetts Real Estate Withholding Requirements

Effective November 1, 2025

 

Significant changes are in place for property transactions in Massachusetts, especially for non-resident sellers. If you’re involved in buying or selling real estate worth $1 million or more, it’s important to understand how the state’s new tax withholding rules will affect your closing process.

 

The Basics

As of November 1, 2025, Massachusetts now requires tax withholding at closing for any real estate sale of $1,000,000 or more when the seller is a non-resident. This means a portion of the sale proceeds must be withheld and sent to the Massachusetts Department of Revenue (DOR).

Who Is Affected?

Sellers Subject to Withholding

The new rule applies to:

• Sellers who don’t live in Massachusetts full-time
• Sellers who are moving out of state
• Out-of-state corporations that no longer have active business operations in Massachusetts

Exempt Sellers (No Withholding Required)

Some sellers are exempt from the withholding requirement, including:

• Full-year Massachusetts residents
• Certain trusts, estates, and pass-through entities
• Nonprofits, banks, and insurance companies
• Government entities

The Key Players: Who Handles the Withholding

The withholding agent, typically the closing attorney or title company, is responsible for:

• Collecting the withholding amount at closing
• Filing Form NRW with the DOR within 10 days
• Remitting the funds to the state

How the Withholding Is Calculated

• Standard Method: 4% of the gross sales price
• Alternative Method (optional):
• 5% of the estimated net gain for individuals
• 8% for corporations

Additional Surtax: A 4% surtax applies to the portion of the sale that exceeds the state’s “Millionaires Tax” threshold for high-value properties.

Essential Steps for Every Transaction

• All sellers must complete a Transferor’s Certification form before closing, even if they qualify for an exemption.
• If this form isn’t provided, the closing attorney must withhold 4% of the total sale price, no exceptions
• The $1,000,000 threshold applies to the total transaction, not per seller. Even if multiple sellers each receive less than $1,000,000, the rule still applies.
• A Form NRW must be filed for every qualifying sale, even when no withholding is required.

What Sellers Should Know

This withholding isn’t an additional tax, it’s simply a prepayment toward your Massachusetts income tax.

• You’ll claim credit for the withheld amount when filing your tax return.
• If too much was withheld, you can receive a refund or apply the excess toward future estimated taxes.

Bottom Line for Real Estate Agents

If you’re representing a seller who lives outside Massachusetts, start the conversation early.

• Inform clients about the new rules well before listing.
  Encourage them to consult their tax advisor and closing attorney early in the process.
• Addressing this up front helps avoid last-minute surprises or delays at the closing table.

Final Thoughts

The new Massachusetts real estate withholding rules may seem complex, but with good communication and preparation, sellers and agents can navigate the process smoothly. Awareness and early planning are key to a stress-free closing day.