FIRPTA Insight · May 19, 2026 · 6 min read

FIRPTA California: How the 3.33% State Stack Works on Top of Federal Withholding

A foreign seller closing a $1,000,000.00 California property sees $183,300.00 of default withholding leave the closing table — $150,000.00 federal FIRPTA and $33,300.00 California Franchise Tax Board. Both halves have a reduction path, and neither runs itself.

Why California is a stacking state

California has its own nonresident real-property withholding regime under Cal. Rev. & Tax. Code §18662(e), administered by the Franchise Tax Board (FTB). It applies to ANY seller whose California residency status would require withholding — foreign persons, out-of-state U.S. residents, and certain entities. For a foreign seller, the California regime runs in parallel with federal FIRPTA, not as part of it.

The default California rate is 3.33% (3 1/3%) of the gross sales price, remitted on Form 593 to the FTB. Federal FIRPTA, under IRC §1445, takes another 15% of the gross. On the same dollar of price, both regimes withhold simultaneously — federal goes to the IRS Ogden Service Center, state goes to FTB. Two separate filings, two separate cash transfers, two separate reduction paths.

The rules at a glance

State rate: 3.33% of gross sales price (default) — Cal. Rev. & Tax. Code §18662(e).
State form: Form 593, Real Estate Withholding Statement. Form 593-V is the payment voucher.
Remittance deadline: by the 20th of the month following closing.
Withholding agent: typically the buyer; in practice the escrow/title company collects and remits.
Reduction path: the alternative-calculation election on Form 593 itself — applies the maximum California PIT rate to the actual computed gain, often a much smaller number than 3.33% of the gross. The legacy Form 593-C was consolidated into Form 593 in 2020; certifications and exemptions are now checkbox sections inside Form 593.
Federal layer: 15% of gross under IRC §1445, on Forms 8288 / 8288-A, remitted within 20 days of closing.

The $1,000,000.00 example

A foreign seller is closing on a $1,000,000.00 home in West Los Angeles. The seller's basis is $640,000.00. The gain is $360,000.00. With no reduction certificates in place, here's what comes off the closing table:

Federal FIRPTA (15% of gross): $150,000.00 to IRS Ogden via Form 8288 + 8288-A.
California (3.33% of gross): $33,300.00 to FTB via Form 593 + 593-V.
Total default closing-table withholding: $183,300.00.

That number is the DEPOSIT, not the final tax. The seller's actual U.S. tax on a $360,000.00 long-term capital gain is meaningfully lower than $183,300.00 in most fact patterns — federal LTCG plus California state PIT on the gain, not 18.33% of the gross. The over-withholding sits with the IRS and FTB until the seller files a federal Form 1040-NR and a California Form 540NR the following year to reconcile and claim refunds. That recovery cycle often runs 12-18 months from closing.

What can be reduced before closing

Both the federal and state withholding amounts can be reduced before closing. The two paths are independent — filing one does not file the other.

Federal: Form 8288-B. The IRS withholding certificate process under Treas. Reg. §1.1445-3. The seller files Form 8288-B with IRS Ogden requesting that withholding be limited to the actual expected federal tax on the gain. When the gain is zero (loss, §1031 exchange, treaty exemption, basis improvements), the certificate can authorize $0 federal withholding. Processing runs 60-90 days from a complete submission; the practical recommendation is to file 60+ days before the projected closing date. IRS Form 8288-B page.

State: alternative-calculation election on Form 593. Instead of 3.33% of the gross, the seller elects withholding equal to the maximum California PIT rate applied to the actual gain. On the $360,000.00 gain above, that math runs at California's top individual rate (currently 12.3% — see the 2026 FTB Form 593 instructions), producing roughly $44,280.00 — actually higher than the 3.33% headline on this fact pattern. The election helps on high-basis, low-gain sales; on high-gain sales it can produce a larger number than the 3.33% default. The seller picks the better of the two on a deal-by-deal basis.

How state and federal interact on the return

The two withholdings flow to two different returns the year after closing:

Federal Form 1040-NR reports the gain and claims credit for the FIRPTA withheld (stamped Form 8288-A is the credit document). Refund of any over-withholding flows from this return. Filing deadline is June 15 for nonresident filers.
California Form 540NR reports the same gain to California and claims credit for the 593 withholding. Refund of any state over-withholding flows from this return.

The federal withholding is not creditable against California tax; the state withholding is not creditable against federal tax. Two parallel calculations, two parallel refunds. ITINs are required for each filing — both the IRS and the FTB use the taxpayer identification number to match payments to returns.

What we do on California closings

For California foreign-seller engagements, the firm prepares Form 8288-B (when there's runway), coordinates Form 593 with the escrow/title company to make sure the alternative-calculation election is run on every deal where it helps, prepares the Form 8288 / 8288-A closing package within the 20-day federal deadline, and prepares the eventual Form 1040-NR and Form 540NR the following filing season. ITINs (Form W-7) are run in parallel when the seller doesn't already have one. Engagement is direct with the seller or buyer; there's no fee to the California title company.

Bottom line

California's 3.33% state withholding (Form 593) stacks on federal FIRPTA's 15% (Form 8288). Default closing-table exposure is 18.33% of the gross.
Both halves have pre-closing reduction paths. Federal is Form 8288-B; state is the alternative-calculation election on Form 593.
Both reductions require runway. 60+ days before closing is the working number for Form 8288-B.
Two returns reconcile the closing-table deposit: Form 1040-NR (federal) and Form 540NR (California).

For the California state landing page and intake form, see FIRPTA California: Foreign-Seller Closings. For the federal mechanics, see the Foreign Sellers Guide and the Florida complete guide (federal-only, no state stack — useful as a contrast).