What Sellers Should Know About Massachusetts DOR Withholding at Closing
One issue that frequently surprises sellers in Massachusetts is Department of Revenue (DOR) withholding at closing. This rule applies in certain situations and can affect how much money a seller receives at settlement.
What Is DOR Withholding?
Massachusetts law requires that, in certain transactions, a portion of the seller’s proceeds be withheld at closing and remitted to the Massachusetts Department of Revenue. This is designed to ensure that capital gains taxes owed by the seller are paid.
DOR withholding most commonly applies when:
The seller is not a Massachusetts resident, or
The property is not the seller’s primary residence, and
The sale may result in a taxable gain
How Much Is Withheld?
The amount withheld is typically based on a percentage of the gross sales price, not the seller’s net proceeds. This can feel significant, especially if the seller was not expecting it.
In some cases, sellers may apply for a withholding reduction or exemption in advance, but this must be done properly and on time.
Why Sellers Should Plan Ahead
DOR withholding is not optional, and it is enforced at closing. Sellers who are unaware of the rule may be surprised when proceeds are reduced.
Early communication with a real estate attorney allows sellers to:
Understand whether withholding applies
Explore potential exemptions
Avoid last-minute delays or confusion
The Role of the Closing Attorney
In Massachusetts, the closing attorney is responsible for determining whether DOR withholding applies and ensuring compliance with state law. This is another reason attorney involvement is required and essential in MA real estate transactions.
Disclaimer: This article is provided for informational purposes only and does not constitute legal or tax advice. Sellers should consult with a Massachusetts real estate attorney or tax professional regarding their specific circumstances.
