There’s an old story claiming that someone once asked Albert Einstein for his phone number and he had to look it up. He supposedly remarked that “an intelligent person doesn’t store information, he knows where to find it.” That makes some sense and carries with it the importance of knowing what we don’t know so we do not give out false information. Einstein had the confidence required to admit he didn’t know the answer to what many would consider a fairly simple question.
So if I asked some number of licensees (particularly those who recently completed the sales agent or associate broker course about the Maine Nonresident Withholding Tax on real estate sales, I suspect many would give an incorrect answer because some rates changed for 2017. When Ben Franklin opined that “In this world, nothing can be said to be certain, except death and taxes,” he didn’t mean the amount would be certain–just the existence.
You’d be correct (well, nearly) if you cited the default calculation as 2.5% of the purchase price. “Nearly” is added because the withholding only applies if the sales price is $50,000 or more.
You might also remember there are some alternative calculations and that each requires a waiver from the Maine Department of Revenue. One of those calculations is based on a “small profit.” Those are the rates that have changed for 2017. With a waiver, the seller may be allowed to have the smaller of the two amounts (2.5% of the purchase price, 10.15% of the profit for residential) withheld.
If you think this is starting to get complicated, you get a sticker. Like Einstein, you may be concluding the best answer to the question “How much is the Maine Nonresident Withholding?” is “We’d better look it up.” Actually, an even better answer is “We’d better consult a tax specialist.” (If your client doesn’t have an accountant or tax advisor, like Einstein this might involve a phone book or its Internet equivalent.)
From an estimating point of view, the safe calculation is the default calculation of 2.5% of the sales price. After all, that is the most the seller will have withheld. If your client is a “do-it-yourself” type you can offer him or her the link to the Maine Revenue Services Website. It’s a very user-friendly place with lots of information and all the forms one may need. (Forms and information use the abbreviation REW-Real Estate Withholding.) Note that any request for a reduction in withholding must be made at least five days before closing.
While there’s no minimum on how helpful we should be with our clients, there may be some limitations when it comes to the amount of knowledge we have–particularly in areas such as taxes that extend beyond our area of expertise. Personally, I think a client who is a nonresident of Maine needs to know he or she may be facing at 2.5% withholding from proceeds at closing. We can and should also explain that there are alternative calculations, waivers, and exemptions and these should be discussed with a tax professional well before closing. In the interest of accuracy, perhaps “the less said, the better.”
Another option might be to provide all nonresident sellers with the Notification to Sellers of Withholding Requirement–it could become part of your listing packet and be included on your listing checklist.
There are just a few days left to register–the course starts on Wednesday, January 25, 2017. Get the complete course schedule and register online at the Arthur Gary School of Real Estate Website… or call 207 856-1712. If you’ve been considering a career in real estate, don’t miss out on this opportunity!
It’s that time of year when cars occasionally need help getting started in the form of a jump or boost that puts more power into the process. If you’ve been “thinking” about a career in real estate, now is a good time to put some power to your thoughts and dreams by taking the Sales Agent Course starting on January 25, 2017 at the Ramada Inn in Bangor Maine. *
This is a live (and lively!) course… admittedly intense and demanding–most students concede they didn’t realize how much there is to learn. But our material and teaching methods have a proven track record. Alumni Renee Jarvis says, “I enjoyed the way Walter taught the subject matter so it would be understood and not just memorized. I truly love Walter’s teaching style…”
For additional information, course dates, and to register online, visit the Arthur Gary School of Real Estate Website or call the school at 207 856-1712. If you have questions about course content or a career in real estate let me know–I’ll be happy to help!
* The state of Maine requires that a person pass the 55 hour Sales Agent course and a state exam, both with a 75% or better, in order to qualify for a Sales Agent license. Our 55 hour Sales Agent course covers all of the material required by Maine License Law and Rules to qualify for a Sales Agent license.
While this survey is specific to the course required to qualify for a broker’s license, it might give us some ideas for others! (The course is called “The Role of the Designated Broker,” but it is not just for those who are planning to be a designated broker. The course also applies to those seeking a broker’s license. For more information, see this post “Should I take the Designated Broker Course?”)
And no worries, this is not a poll about your political opinion or candidate preferences!