- What is Maine real estate withholding?
- Are there any exceptions to the Maine real estate withholding requirement?
- Can the Maine real estate withholding amount be reduced?
- How do I request an exemption or a reduction of the withholding?
- When is the request for an exemption or reduction due?
- What is the Maine real estate withholding based on if the property is sold on an installment sale basis?
- Am I subject to the Maine real estate withholding requirement if the sale of the Maine real property is considered a Section 1031 like-kind exchange?
- Are nonresident individuals selling property in Maine the only individuals subject to the real estate withholding requirement?
- Am I subject to Maine real estate withholding if I placed my Maine home on the market as a Maine resident but don't sell the property until after I have become a resident of another state?
- Is the Maine real estate withholding amount considered the final Maine income tax due on the sale of my Maine property?
- What if there is more than one owner of the Maine property being sold?
- How does a partnership operating in Maine determine if it is subject to Maine real estate withholding?
- How do I complete Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 if there are multiple sellers or the seller is an LLC or partnership?
- Am I required to report the seller's social security number (SSN) or employer identification number (EIN) when filing Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120?
- I am a nonresident of Maine and sold real property located in Maine. Do I need to file a Maine income tax return to report the sale of property and to receive a refund of real estate withholding?
1. What is Maine real estate withholding?
Maine law requires, at the time of closing on total considerations of $100,000 or more, that every buyer of real property must withhold 2.5% of the consideration from any nonresident individual, estate, or business seller. This 2.5% withholding is an estimated tax payment to ensure that a seller complies with Maine income tax responsibilities. The withholding, along with a completed Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 must be sent to Maine Revenue Services within 30 days of the date of closing. Prior to the closing, a seller may qualify for a reduction in the amount of withholding or an exemption from the real estate withholding requirement, see Question 2 below. See 36 M.R.S. § 5250-A.
Note: A nonresident seller includes a Maine resident seller that has not provided a residency affidavit (Form REW-2 or Form REW-3) to the buyer or real estate escrow person.
Revised: April 3, 2024
2. Are there any exceptions to the Maine real estate withholding requirement?
Yes. A seller is exempt from Maine real estate withholding if any of the following are true:
- The seller provides to the buyer or real estate escrow person a signed residency affidavit (Maine Form REW-2 or REW-3) stating, under penalty of perjury, that as of the date of transfer the seller is a resident of Maine, as defined in 36 M.R.S. § 5250-A;
- The seller or the buyer has received a certificate of exemption from Maine Revenue Services stating that no tax is due on the gain from the transfer or that the seller has provided adequate security to cover the liability;
- The consideration for the property is less than $100,000 (see note below);
- Written notification of the withholding requirements has not been provided to the buyer. The real estate escrow person is liable for the withholding tax unless it is shown that the failure to notify is due to reasonable cause;
- The seller is the State or an agency or a political subdivision of the State, the federal government, an organization exempt from income taxes pursuant to the Internal Revenue Code, §501(a), an insurance company exempt from Maine income taxes or a subsidiary of an insurance company described in 24-A M.R.S., § 1157 (5)(B)(1) that is exempt from Maine income taxes; or,
- The property is being transferred via a foreclosure sale. Foreclosure sale means a sale of real property incident to a foreclosure and includes a mortgagee's sale of real estate owned property of which the mortgagee, or third-party entity, retained or took ownership as the result of an unsuccessful attempt to sell the property at the time of a previous foreclosure auction.
See 36 M.R.S. §§ 5250-A(3) and 5250-A(3-A) for these and other exceptions that may apply. Also see Questions 3 and 4 below for requesting a reduction in the amount withheld or an exemption from the Maine real estate withholding requirement.
Note: Federally taxable gains on the sale of Maine real property are taxable by Maine, even if the total consideration is less than $100,000.
Revised: April 3, 2024
3. Can the Maine real estate withholding amount be reduced?
Yes. The seller may submit a request to the State Tax Assessor to reduce the withholding. See Question 4 below. If the seller is a nonresident individual or trust and 7.15% of the realized gain is less than 2.5% of the sales price, the lower withholding amount may be allowed. If the seller is a nonresident corporation and 8.93% of the realized gain is less than 2.5% of the sales price, that lower amount may be allowed. Installment sales may also result in a reduced withholding amount (see Question 7 below). If there will be no gain, the seller may apply for an exemption from withholding (see Question 4 below).
Note: A nonresident seller includes a Maine resident seller that has not provided a residency affidavit (Form REW-2 or Form REW-3) to the buyer or real estate escrow person.
Revised: April 3, 2024
4. How do I request an exemption or a reduction of the withholding?
File Form REW-5 to request an exemption or a reduction in the real estate withholding amount. File your application electronically on the Maine Tax Portal at revenue.maine.gov or download Form REW-5 and fax, email, or mail the completed form to Maine Revenue Services.
Exemptions are generally granted when there is a loss on the sale of the property, a federal exclusion of the gain on the sale of a principal residence, the transaction involves a like-kind exchange, or for other situations resulting in no Maine income tax liability. In addition, reductions in the real estate withholding amount may be authorized for the situations stated in Question 3 above. If Maine Revenue Services approves a Form REW-5 request, a certificate is issued to the seller which must be provided to the buyer or real estate escrow person.
Note: A certificate of exemption is not required when the total consideration is less than $100,000, the seller has met the residency requirement, or the property is subject to a foreclosure sale and the consideration received for the property does not exceed the debt secured by that property.
Revised: April 3, 2024
5. When is the request for an exemption or reduction due?
A request for exemption or reduction in real estate withholding (Form REW-5) should be filed as soon as the seller and buyer have reached an agreement to transfer property.
Sellers should allow at least 5 business days for Maine Revenue Services to respond to a Form REW-5 request. The response time will increase if the request is missing required information and/or documentation. The seller becomes ineligible for an exemption or reduction after the sale has closed.
Revised: April 3, 2024
6. What is the Maine real estate withholding based on if the property is sold on an installment sale basis?
The required withholding amount is still 2.5% of the total sales price. However, the seller may request that a lower amount be withheld. Following the federal guidelines for an installment sale, the seller reports the amount of gain to be realized in the year of the sale. The Maine real estate withholding amount may be based on this first-year gain. The taxpayer is then responsible for making estimated tax payments and filing a Maine income tax return yearly until the installment contract is complete.
Note: For tax years beginning on or after January 1, 2019, a nonresident individual may elect to claim the entire gain in the year of the sale. See Maine Form 1040ME, Schedule 1A instructions for more information.
Revised: April 8, 2022
7. Am I subject to the Maine real estate withholding requirement if the sale of the Maine real property is considered a Section 1031 like-kind exchange?
Yes. Maine real estate withholding is required, even in a like-kind exchange. Maine Revenue Services follows the federal guidelines on the treatment of IRC Section 1031 like-kind exchanges. Therefore, if a capital gain or loss is deferred for federal income tax purposes (due to the qualifying like-kind exchange transaction), the gain or loss is also deferred for Maine income tax purposes. As such, the seller may request an exemption from the Maine real estate withholding requirement for this property transfer by timely filing Form REW-5. A copy of the Section 1031 like-kind exchange contract must accompany the Form REW-5. For more information on when a request for exemption or reduction is due, see Question 5 above.
Revised: April 3, 2024
8. Are nonresident individuals selling property in Maine the only individuals subject to the real estate withholding requirement?
No. A Maine resident seller of Maine real estate that does not provide a signed residency affidavit to the buyer or real estate escrow person is also subject to the real estate withholding requirement.
Note: Regardless of residency status, all individuals and entities are subject to Maine income tax on gains realized from the sale of real estate in Maine.
Revised: April 8, 2022
9. Am I subject to Maine real estate withholding if I placed my Maine home on the market as a Maine resident but don't sell the property until after I have become a resident of another state?
Yes. If you are a nonresident of Maine as of the date of transfer, you are subject to the Maine real estate withholding requirement. For more information on exceptions to the real estate withholding requirement, see Question 2 above.
Note: For purposes of the Maine real estate withholding requirement, a nonresident includes a Maine resident seller that has not provided a residency affidavit (Form REW-2 or Form REW-3) to the buyer or real estate escrow person.
Revised: April 3, 2024
10. Is the Maine real estate withholding amount considered the final Maine income tax due on the sale of my Maine property?
No. The Maine real estate withholding amount is only an estimate of the income tax due on the gain from the sale of the Maine property. A Maine income tax return must be filed to determine the actual tax due on the gain and whether or not a refund is due to you. In some cases, an additional amount may be due with the Maine income tax return filed.
Revised: February 3, 2021
11. What if there is more than one owner of the Maine property being sold?
If the total purchase price for the property is $100,000 or more, the buyer (or the real estate escrow person) will withhold 2.5% from each nonresident seller’s share of the total sales price. The amount withheld is remitted to Maine Revenue Services and the proper amount will be credited to each nonresident seller’s Maine income tax account.
If there are multiple sellers, you must complete a separate REW-1 form for each seller receiving proceeds from the sale. For example, if the seller is a partnership, complete a separate REW-1 form and submit payment for each partner receiving proceeds from the disposition. Also see Questions 13 and FAQ 14 below.
Note: A nonresident seller includes a Maine resident seller that has not provided a residency affidavit (Form REW-2 or Form REW-3) to the buyer or real estate escrow person.
Revised: April 3, 2024
12. How does a partnership operating in Maine determine if it is subject to Maine real estate withholding?
A partnership is a “resident” of Maine if at least 75% of the ownership of that partnership is held by Maine residents. In that case, the partnership is not subject to the withholding requirement. Limited liability companies (LLCs) are considered partnerships unless otherwise classified for federal income tax purposes.
If there are multiple sellers, you must complete a REW-1 form for each seller receiving proceeds from the sale. For example, if the seller is a partnership, complete a separate REW-1 form and submit payment for each partner receiving proceeds from the disposition. Also see FAQ 13 and FAQ 14 below.
Note: Resident sellers must provide a signed residency affidavit (Form REW-2 or Form REW-3) to the buyer stating, under the penalty of perjury, as of the date of transfer the seller is a resident of the State. A resident seller who fails to provide a signed residency affidavit to the buyer does not meet the requirements for a residency exception pursuant to 36 M.R.S. § 5250-A(3)(1).
Revised: July 21, 2023
13. How do I complete Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 if there are multiple sellers or the seller is an LLC or partnership?
When property is sold by more than one nonresident seller, the buyer (or the real estate escrow person) must complete a separate form for each nonresident seller receiving proceeds from the sale. For example, if the Maine property is owned by more than one individual, a separate Form REW-1-1040 must be completed for each nonresident individual receiving proceeds from the sale. If the seller is an LLC or partnership, complete a separate Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120 for each nonresident partner receiving proceeds from the disposition.
Be sure to complete the appropriate form for each seller. Use Form REW-1-1040 for individuals and sole proprietors, Form REW-1-1041 for trusts and estates, and Form REW-1-1120 for corporations. If applicable, the name, employer identification number (EIN), and entity type of the pass-through entity seller must be provided. For more information, see the "For pass-through entity seller only" instructions on Form REW-1-1040, Form REW-1-1041, or Form REW-1-1120.
Revised: July 21, 2023
14. Am I required to report the seller's social security number (SSN) or employer identification number (EIN) when filing Form REW-1-1040, Form REW-1-1041 or Form REW-1-1120?
Yes. REW payments remitted to MRS are allocated and posted to each seller’s account identified by their SSN or EIN. It is therefore necessary to report the SSN(s) or EIN of each individual, estate, trust, or corporation that will claim the income from the sale of property on their federal income tax return. Include the SSN of each spouse for sellers that file a married joint income tax return. Do not report a pass-through entity’s EIN on these forms (see Question 13 above). Forms REW-1-1040, REW-1-1041, and REW-1-1120 that do not include correct taxpayer identification numbers may result in denied claims of real estate withholding.
Note: If the seller is a LLC, or partnership, or other pass-through entity, the entity's name, EIN, and entity type must be provided. For more information, see the "For pass-through entity seller only" instructions on Form REW-1-1040, Form REW-1-1041, or Form REW-1-1120.
Revised: April 3, 2024
15. I am a nonresident of Maine and sold real property located in Maine. Do I need to file a Maine income tax return to report the sale of property and to receive a refund of the real estate withholding?
Generally, a seller who is a nonresident individual must file a Maine income tax return for the tax year during which the sale of the Maine property occurred to calculate any Maine income tax due or overpaid. A return is not required if the capital gain from the sale, combined with other Maine-source taxable income, does not result in a Maine income tax liability. However, a Maine income tax return must be filed to get a refund of any estimated real estate withholding amount in excess of the Maine income tax liability.
The seller must attach a copy of the REW-1 form to the Maine income tax return to ensure proper credit for real estate withholding paid. Any claim for refund of an overpayment of withholding must be filed within three years from the due date of the return or three years from the time the tax was paid, whichever expires later. For more information on the Maine filing requirements, see Maine Rule 806, the Frequently Asked Questions for individual income tax (Question 6), and the instructions for Form 1040ME and Schedule NR or NRH at www.maine.gov/revenue.
Revised: July 21, 2023