California Form 593 for Home Sellers: The 3 1/3% Withholding and the Principal Residence Exemption

Quick answer: When you sell a home in California, escrow will ask you to fill out Form 593. If no exemption applies, escrow withholds 3 1/3% of the sales price and sends it to the Franchise Tax Board (FTB). Many people selling their own main home can check the principal residence exemption, and nothing is withheld. Either way, Form 593 isn't the tax itself. It's a prepayment, and you still report the sale on your California return.

We're Steve Hise and Tricia Garcia, Simi Valley agents. Here's how the form works, straight from the FTB's 2026 instructions.

1. What Form 593 is, and why escrow hands it to you

California requires withholding when California real estate is sold or transferred (Revenue and Taxation Code section 18662, as cited in the FTB instructions). The "real estate escrow person" handles it: usually your escrow officer, or the title company or attorney who pays out the sale money.

Form 593 does two jobs: you certify an exemption on it if you qualify, and escrow uses it to report anything withheld.

The timing matters. The FTB says the seller must turn in Form 593 before the close of escrow to prevent withholding. Once escrow closes, the only way to get withheld money back is to claim it as a credit on your California tax return.

2. How much is withheld: 3 1/3%, or the alternative calculation

If no exemption applies, there are two ways to figure the amount:

• Sales price method: 3 1/3% (.0333) of the sales price, multiplied by your ownership percentage. On a $900,000 sale, that's about $29,970.
• Alternative withholding calculation: you can elect to have withholding based on your estimated gain instead. For individuals, the FTB's rate for this calculation is 12.3% of the gain you figure in Part VI of the form. If your gain is small, that can mean much less is held back.

You can use estimates for the alternative calculation, but the FTB is clear that your estimates can't show a loss when you really have a gain. Knowingly signing a false certificate to avoid withholding carries a penalty of $1,000 or 20% of the required withholding, whichever is greater.

3. The principal residence exemption (the one most homeowners use)

Part III of Form 593 lists the exemptions that fully exempt a sale. The first two are the ones homeowners care about:

• Line 1, Principal residence: the home qualifies as your main home under federal rules (IRC section 121). Generally, you owned it and lived in it as your main home for at least two of the five years before the sale. There are exceptions to the two-year rule when the main reason for selling is a job change, health, or unforeseen circumstances, such as a death, a divorce or a job loss. IRS Publication 523 explains those.
• Line 2, Last used as your principal residence: if the home was last used as your main home, no withholding is required, even without the two-year test. But if its last use was as a rental, vacation home or second home, this one doesn't apply.

You can only have one main home at a time. If only part of the property was your residence (say you rented out a unit), a second Form 593 covers the rest.

The exemption is only about withholding. Whether you owe tax is figured on your return, where the federal $250,000 / $500,000 home-sale exclusion comes in.

4. Other ways a sale is exempt from withholding

According to the FTB, withholding isn't required at all when:

• The sales price is $100,000 or less.
• The property is in foreclosure.
• The seller is a bank acting as a trustee (other than under a deed of trust).

Part III also includes a loss or zero gain certification (line 3). You can only check it after completing the Part VI computation, and the FTB warns that you can't claim a loss just because you won't get any cash at closing, or because you feel you're selling for less than the home is worth. Other lines cover involuntary conversions, like-kind exchanges and certain entities.

5. If you're leaving California: what changes

Where you're moving doesn't change the form. If you sell the Simi Valley home you live in, then move, the principal residence certification works the same way.

It's different if you've already moved and rented the house out or kept it as a second home. Then line 2 doesn't fit. You'd look at the two-out-of-five-year test on line 1, the alternative calculation, or plan on the 3 1/3% withholding and claim it as a credit.

Also note: qualifying for an exemption, or having tax withheld, doesn't remove your obligation to file a California return and pay any tax due on the sale. The FTB lists Form 540NR (nonresident or part-year resident) among the returns where you can claim the credit. Talk with a CPA about which return fits your move date.

Our guide to leaving California and selling your Simi Valley home covers timing your sale with your purchase in the new state.

6. Homes in a trust, and homes owned by more than one person

From the FTB instructions:

• Revocable (grantor) trust: the form lists the individual grantor's name and Social Security number, not the trust. The sale and any credit go on the grantor's own return.
• Trust after the grantor's death: if the trust became irrevocable at death, the form lists the trust's name and its federal EIN. The principal residence test then looks at whether the home was the decedent's main home.
• Married sellers filing jointly go on one Form 593. Other co-owners each get their own, showing their ownership percentage.

7. If money was withheld: getting it back

Escrow sends the withholding to the FTB by the 20th day of the month after the month escrow closes, and gives you a copy of Form 593 by that same deadline.

To claim the credit, you file a California return, report the sale, enter the amount from line 37 of Form 593 as withholding, and attach a copy of the form to the lower front of your return. If your filing status changed after escrow closed (for example, a marriage or a divorce), the FTB asks you to call Withholding Services and Compliance at 888-792-4900 before you file.

For the rest of your closing costs, see what it costs to sell a house in Simi Valley.

Frequently asked questions

What is California Form 593?
It's the Real Estate Withholding Statement. Sellers use it to certify an exemption from California's real estate withholding, and escrow uses it to report any amount withheld and sent to the Franchise Tax Board.

How much does California withhold when I sell my house?
If no exemption applies, 3 1/3% of the sales price (times your ownership share). You can instead elect the alternative calculation, which for individuals is 12.3% of your estimated gain.

Do I have to pay withholding if I'm selling my primary residence?
Usually not. If the home qualifies as your principal residence under IRC section 121, or was last used as your main home, you can certify the exemption on Form 593 before escrow closes and nothing is withheld.

Can I get the withheld money back?
Yes, as a credit on your California tax return for the year of the sale. You attach a copy of Form 593. After escrow closes, that's the only way to recover it.

Does the exemption mean I don't owe California tax?
No. Form 593 only covers withholding. You still have to file a California return and pay any tax due on the sale. Ask a CPA how the home-sale exclusion applies to you.

Selling in Simi Valley and moving out of state?

We'll walk you through the paperwork with your escrow officer and plan your sale around your move. We plan both moves together so you're not stuck in between. Start here, or call or text 805-424-6226. Curious what you'd walk away with? Start with What's My Simi Valley Home Worth?

Sources

• Franchise Tax Board, 2026 Instructions for Form 593 (viewed October 24, 2026): withholding requirement, exemptions, 3 1/3% and alternative calculation, tax rates, filing deadlines, claiming the credit, penalties.
• Franchise Tax Board, 2026 Form 593, Real Estate Withholding Statement.
• IRS Publication 523, Selling Your Home: principal residence rules and exceptions to the two-year test.

Steve Hise and Tricia Garcia, Real Estate Toolbox at eXp Realty
Steve Hise CA DRE #01702055 | Tricia Garcia CA DRE #02032007

This article is general information, not legal or tax advice. Tax rules and FTB forms change each year. Talk with a CPA or tax attorney about your own sale before you sign Form 593.