The short answer
Georgia taxes recognized real estate gain at its flat individual rate, 4.99% for tax year 2026 under HB 463, and because Georgia starts from federal adjusted gross income the section 1031 deferral applies to the state return automatically. Nonresident sellers face a 3% withholding on the purchase price, remitted by the buyer on form G-2RP, unless an exemption documented on form IT-AFF3 applies; the like-kind box on that form is written for replacement property located in Georgia, which matters when the replacement is a DST holding property elsewhere. Georgia's transfer tax is about $1 per $1,000 and falls on the seller, and the state has no claw-back rule on deferred gain.
Georgia at a glance
| State tax on real estate gains | Flat 4.99% for tax year 2026 (HB 463, effective January 1, 2026); no capital gains rate |
|---|---|
| Nonresident withholding | 3% of the purchase price, or 3% of gain with an IT-AFF2 affidavit; none under $20,000 |
| Exchange exemption | IT-AFF3 like-kind box names Georgia replacement property; DOR: none if not taxable |
| Who remits | The buyer, on form G-2RP, by the end of the month after closing; buyer personally liable |
| Transfer tax | $1 for the first $1,000 plus $0.10 per $100 (about 0.1%); seller pays by statute (PT-61) |
| Intangible recording tax | $1.50 per $500 of a long-term note secured by Georgia real estate, capped at $25,000 |
| Deferred-gain tracking | None; Georgia has no annual like-kind information return |
| Bonus depreciation | Georgia has not adopted IRC section 168(k) bonus depreciation |
Georgia's 3% withholding and the IT-AFF3 exemption for exchanges
When a nonresident sells Georgia real property, O.C.G.A. section 48-7-128 requires the buyer to withhold 'a withholding tax equal to 3 percent of the purchase price or consideration' and remit it on form G-2RP by the last day of the month following the sale; a buyer who fails to withhold 'shall be personally liable for the amount of such tax.' Because the buyer bears the risk, Georgia closing attorneys withhold unless the seller documents an exemption.
Three seller affidavits do that work. IT-AFF1 establishes Georgia residency or deemed residency, IT-AFF2 swears to the actual gain so the 3% applies to gain rather than price, and IT-AFF3, the Seller's Certificate of Exemption, lists the statutory exemptions, including the like-kind exchange.
No withholding applies to a purchase price below $20,000, or where 3% of the gain shown on IT-AFF2 comes to less than $600. Georgia residents are outside the rule entirely; they report any recognized gain on Form 500 and pay with the return.
- Rate: 3% of price, or 3% of recognized gain with IT-AFF2.
- Remitter: the buyer, on G-2RP, which the seller then attaches to the Georgia return as proof of withholding.
- Exemption paperwork: IT-AFF3 is optional by law but is what the closing attorney will ask for.
Why the like-kind box says 'replacement property is located in Georgia'
The Department of Revenue's answer on exchanges is short: 'Withholding is not required to the extent the income from the sale is not subject to Georgia income tax.' A fully deferred exchange recognizes no income, so nothing is subject to Georgia tax and nothing needs to be withheld.
The IT-AFF3 form, however, words its exemption box as 'the transaction is a like kind exchange, the replacement property is located in Georgia, and the income from this sale is not subject to federal or state income tax.' A nonresident replacing a Georgia building with an out-of-state DST cannot initial that statement literally, and a cautious closing attorney may withhold the 3% rather than rely on the Department's broader answer.
Plan for both outcomes. Raise the exemption with the closing attorney when the contract is signed, provide the exchange agreement showing proceeds go to your qualified intermediary, and if withholding happens anyway, treat it as a prepayment recovered on your Georgia nonresident return. Boot changes the analysis: gain recognized on cash or debt relief is subject to Georgia tax, so withholding on that portion is proper.
A 4.99% flat rate for 2026, and what that means for a recognized gain
Georgia replaced its brackets with a flat individual rate, and HB 463, signed May 11, 2026, cut it from 5.19% to 4.99% effective January 1, 2026, with provisions for further annual reductions. The rate applies to a recognized real estate gain, depreciation recapture included, because Georgia has no preferential capital gains rate.
Georgia is a static-conformity state that adopts the Internal Revenue Code as of a fixed date the General Assembly updates, and section 1031 is not on the Department's list of federal provisions Georgia declines to follow. Deferral on the federal return is deferral on Form 500.
On a hypothetical $800,000 gain, the Georgia tax avoided by a complete exchange is about $39,900 at 4.99%; that is smaller than in graduated-rate states but not trivial, and it sits on top of the federal deferral explained on our 1031 exchange overview.
Transfer tax and intangible tax: small, seller-paid, and unaffected by exchanging
Georgia's real estate transfer tax is $1 for the first $1,000 of consideration and 10 cents for each additional $100, roughly 0.1%, declared on form PT-61 through the Superior Court Clerks' Cooperative Authority before the deed can be recorded. The Department of Revenue notes that the seller is legally responsible, though contracts frequently shift it to the buyer.
The intangible recording tax is the larger number when replacement property is financed: $1.50 per $500 of the face amount of a long-term note secured by Georgia real estate, up to $25,000 per note, paid by the lender and usually passed to the borrower. An exchange changes neither tax, and a DST purchase records no Georgia security deed in the investor's name.
No claw-back in Georgia, but residents keep reporting worldwide income
Georgia has no statute that follows deferred gain out of the state. There is no Georgia counterpart to California's yearly information return on deferred gain, so a nonresident who exchanges Georgia property for property elsewhere closes the Georgia chapter at the settlement table.
Residents are different for the ordinary reason that Georgia taxes residents on all of their income. If you exchange into a DST and later sell or receive a taxable distribution while still a Georgia resident, that gain is Georgia income in that year.
HB 581's inflation cap protects homesteads, not rentals
Georgia's 2024 property tax reform, HB 581, created a statewide floating homestead exemption that limits annual assessment increases on a homesteaded property to the rate of inflation, with the base reset whenever the home is sold. It applies only to homesteaded property, so rental and commercial parcels get no cap, and the same law requires every parcel to be appraised at least once every three years.
Counties, cities and school districts could opt out by resolution after three public hearings before March 1, 2025. For an investor the message is that Georgia has no cap on investment property and therefore nothing that resets on your sale; the buyer's bill depends on the county's next appraisal, not on the closing.
Bonus depreciation funds look different on a Georgia return
Some exchangers pair a DST with a bonus depreciation fund to shelter boot. On a Georgia return the shelter is thinner, because the Department of Revenue's conformity page lists the '30%, 50%, and 100% bonus depreciation rules, I.R.C. Section 168(k)' among provisions Georgia has not adopted, which means a Georgia addback and slower state depreciation.
The federal deduction still works; the Georgia deduction arrives over the asset's normal recovery period. Confirm the current year's conformity bill with your CPA, since the General Assembly revisits the list each session.
Replacement property
Exchanging out of Georgia into a DST: withholding first, then sourcing
The DST route satisfies Georgia's exchange treatment because Georgia follows the federal result, but it interacts with the IT-AFF3 wording above: a nonresident should expect a conversation about the 3% withholding, while a Georgia resident has no withholding to discuss.
After closing, the trust's rental income and eventual gain are generally sourced to the states where its properties sit. A Georgia resident reports that income on Form 500 and claims the credit under O.C.G.A. section 48-7-28 for tax paid to another state on 'investment in property having a taxable situs in another state,' capped at the Georgia tax on the same income.
A DST holding Georgia property keeps a Georgia resident within a single state's rules at 4.99% and brings out-of-state investors into Georgia nonresident filing. Breakwater Exchange brokers DST placements in every state through a regulated broker-dealer and has done so for more than twenty years with vetted national sponsors; the sponsor's property list and your CPA, with the Department of Revenue for Georgia-specific questions, decide the tax map.
Questions investors ask about 1031 exchanges in Georgia
I live in Georgia. Is any tax withheld when I sell my Atlanta rental?
No. The 3% withholding applies only to nonresident sellers; a resident signs IT-AFF1 confirming residency and reports any recognized gain on Form 500.
I live in Tennessee and am exchanging my Savannah building into a DST. Will 3% be withheld?
Possibly. The Department says withholding is not required to the extent the sale is not subject to Georgia tax, but the IT-AFF3 like-kind box refers to replacement property located in Georgia, so the closing attorney may withhold and you would recover it on your Georgia nonresident return.
What does Georgia's transfer tax cost on a $2 million sale?
About $2,000: $1 for the first $1,000 plus $0.10 for each additional $100. The seller is responsible by statute unless the contract says otherwise, and the amount is the same whether or not the sale is part of an exchange.
Does Georgia tax the deferred gain later if my DST is in another state?
Not through any tracking rule, because Georgia has none. A Georgia resident reports a future taxable sale as that year's income, and a nonresident owes Georgia nothing further on property outside the state.
Is the 4.99% rate locked for 2026?
HB 463 set 4.99% effective January 1, 2026, and contemplates further annual reductions in later years, so 4.99% is the rate for gain recognized in 2026; confirm any later change with your CPA or the Department of Revenue.
Sources
The rules above were checked against these publications on September 18, 2026. Rates and forms change; confirm the current version with your CPA and the Georgia tax agency before you close. This page is general information, not tax or legal advice.
- O.C.G.A. section 48-7-128, withholding on sale or transfer of real property by nonresidents (FindLaw)
- Georgia Department of Revenue withholding publication, regulation 560-7-8-.35, FAQ and forms IT-AFF1/IT-AFF2/IT-AFF3/G-2RP (reproduced in a title company package)
- Office of Governor Brian P. Kemp, press release on HB 463 income tax rate reduction (May 11, 2026)
- Georgia Department of Revenue, Real Estate Transfer Tax
- Georgia Department of Revenue, Intangible Recording Tax
- Georgia Department of Revenue, Income Tax Federal Tax Changes (conformity and bonus depreciation)
- Georgia House Budget and Research Office, HB 581 Property Tax Relief and Reform policy brief
- O.C.G.A. section 48-7-28, credit for taxes paid to other states (FindLaw)