The short answer
Massachusetts regulation 830 CMR 62B.2.4, issued under G.L. c. 62B, section 2 and effective for closings on or after November 1, 2025, requires the closing attorney, title company or escrow agent to withhold on any sale of Massachusetts real estate with a gross sales price of $1,000,000 or more. The default is 4% of the seller's share of the gross price; a seller may instead elect withholding on estimated net gain at 5% (8% for corporations), with an extra 4% on amounts over the surtax threshold. A section 1031 exchange is not exempt in the ordinary sense. Withholding is not required on gain that is deferred, but only if the seller's Transferor's Certification states that gain is being deferred through a qualified intermediary and consents to Massachusetts jurisdiction to collect the tax when the gain is eventually realized. Form NRW and every certification are due within 10 days of closing, and a certification cannot be added later. Massachusetts residents and pass-through entities are exempt. The state's income tax treatment of the exchange is on the Massachusetts 1031 exchange page.
At a glance
| Authority | 830 CMR 62B.2.4, promulgated August 15, 2025 under G.L. c. 62B, section 2; effective for closings on or after November 1, 2025 |
|---|---|
| Threshold | Gross sales price of $1,000,000 or more, measured on the whole transaction, not each owner's share |
| Default withholding | 4% of the transferor's share of the gross sales price, plus 4% on the portion over $1,107,750 for 2026 |
| Alternative | Estimated net gain times 5% for individuals and trusts, or 8% for corporations, elected on the certification |
| Exchange treatment | No withholding on deferred gain if the certification states the deferral through a qualified intermediary and consents to Massachusetts jurisdiction |
| Boot | Withholding is required on any gain recognized under section 1031(b) even in a qualifying exchange |
| Deadline | Form NRW, the certifications and any payment within 10 days of closing, filed electronically |
| Failed exchange | Written notice to the Commissioner within ten days after the section 1031(a)(3) periods expire, and payment with the next estimated tax installment |
Sales of $1 million or more now run through Form NRW within ten days of closing
The Department of Revenue adopted 830 CMR 62B.2.4 on August 15, 2025 to collect income tax and corporate excise from sellers of Massachusetts real estate who may never file a return. It applies to any transfer of property located wholly or partly in Massachusetts where the gross sales price, including cash, other property and debt the buyer assumes or takes subject to, equals or exceeds the $1,000,000 withholding threshold.
The withholding agent is the person who closes the deal and disburses the money: an attorney, title company or escrow company, with the buyer stepping in if there is none. Within 10 days of closing the agent must file Form NRW electronically, attach a Transferor's Certification for every seller, and remit whatever was withheld. The return is due even when every seller is exempt and nothing is withheld.
The threshold is tested on the entire transaction. The regulation's own example has two owners selling for $1,500,000; the 20% owner's $300,000 share is below $1,000,000, yet the whole sale is subject to withholding and the agent withholds $12,000 from the owner who fails to hand in a certification. Full-year residents, pass-through entities, publicly traded partnerships, resident estates and trusts, and corporations with a continuing Massachusetts business presence are exempt, but each of them has to say so on a certification.
Two ways to compute the hold-back: 4% of the price or the tax rate on estimated gain
The default under 830 CMR 62B.2.4(3)(c) is the seller's share of the gross sales price multiplied by 4%, with an additional 4% withheld from the portion above the surtax threshold in G.L. c. 62, section 4(d), which the 2026 certification prints as $1,107,750. On a $2,000,000 sale by a single nonresident that is $80,000 plus $35,690, before any exemption.
The alternative in 62B.2.4(3)(d) is estimated net gain, meaning the gross price less estimated adjusted basis and settlement costs, multiplied by the seller's rate: the 5% personal income tax rate for individuals and trusts regardless of the character of the gain, 8% for corporations, plus the 4% surtax on gain above the threshold. The regulation's example seller with $1,200,000 of price and $640,000 of basis has $560,000 of estimated gain and $28,000 withheld.
The alternative must be elected on the Transferor's Certification at or before closing, with the estimated gain and rate stated. A seller who provides no certification before Form NRW is filed gets the gross-price method, cannot claim any exemption or reduction, and cannot fix it with an amended return.
An exchange is certified, not exempt: the deferral statement and the jurisdiction consent
Section (6) of the regulation deals with like-kind exchanges directly. Withholding is not generally required on the amount of gain deferred under section 1031 for Massachusetts purposes, but to avoid it the transferor must give the withholding agent a statement on the Transferor's Certification acknowledging the amount of gain deferred and consenting to personal jurisdiction in Massachusetts for the determination and collection of taxes, interest, penalties and fees that will be due when the gain is realized.
The 2026 certification carries that statement as an oval in Part 3, Section 3: the Transferor will be deferring all or part of the gain under Code section 1031 using a qualified intermediary, and by filling it in consents to Massachusetts jurisdiction. The reduction that flows from it, entered on Part 4 line 3 (or line 5 under the alternative method), is the portion of the gross sales price reasonably attributed to the gain that is deferred. The form also has an oval to confirm the seller received 0% of the gross sales price, which fits a fully assigned exchange where every dollar goes to the intermediary.
The consent is the point of the exercise. Massachusetts intends to tax the Massachusetts-source gain when the replacement property is later sold, wherever you live by then, and the certification is the paper trail; the state's claw-back rule is covered on the Massachusetts state page. Sign the certification before closing and give it to the withholding agent, because 62B.2.4(9)(b) says a certification may not be submitted after the due date of the withholding return.
Boot is withheld on, and a failed exchange triggers a ten-day notice
The regulation keeps withholding on any gain recognized under section 1031(b), as adjusted for Massachusetts purposes, even when the transfer otherwise qualifies as a like-kind exchange. Cash or debt relief boot is therefore withheld on, and the certification's structure makes the alternative calculation the sensible election for an exchanger with boot.
Hypothetical: a Connecticut resident sells a Worcester apartment building for $2,000,000 with $1,200,000 of estimated basis and costs, so estimated net gain is $800,000. The exchange defers $700,000 and the seller keeps $100,000 at closing. Under the alternative method the withholding is 5% of $100,000, or $5,000; under the default gross-price method the reduction is only the part of the price attributable to the deferred gain, and the agent would withhold 4% of the remaining $1,300,000, or $52,000. Run your own numbers with your CPA before choosing the method on the certification.
If the exchange appears to qualify at closing but later fails the section 1031 tests, 62B.2.4(6)(c) requires the transferor to notify the Commissioner in writing within ten days after the identification and exchange periods in section 1031(a)(3) expire, and to remit the withholding that would have been required with the next estimated tax installment under G.L. c. 62B, section 14. That is a Massachusetts duty on top of the federal consequences of a failed exchange, and it falls on the seller, not the closing attorney.
Pass-through entities, co-owners and the first-year penalty relief
A partnership, S corporation or trust that passes gain through to its members is an exempt transferor under 62B.2.4(4), so an LLC taxed as a partnership that sells and exchanges files a certification claiming the pass-through exemption and nothing is withheld. A single-member LLC or grantor trust is disregarded, and the beneficial owner is the transferor who must certify; a nonresident owner uses the section 1031 oval.
Where several owners sell, each one's treatment is determined separately on its own certification while the $1,000,000 test looks at the whole sale. A resident co-owner claims the full-year resident exemption and represents that residency will continue after closing; the nonresident exchanger certifies the deferral. The withholding agent may rely on a certification taken in good faith and is not liable for penalties when it does so, which is why agents will insist on having every certification in hand at the closing table.
Withheld amounts are credited against the seller's Massachusetts tax and refunded if they exceed it, but only by filing the return; the money cannot be routed back to the intermediary. The general rules on state withholding at closing explain why that timing matters for the replacement side of an exchange, including a DST replacement that must be funded within 180 days.
Related questions
Does the Massachusetts withholding apply to a sale of $950,000?
No. The regulation applies only when the gross sales price of the whole transaction, including any debt the buyer assumes, is $1,000,000 or more. Below that there is no Form NRW, no certification and no withholding, whether or not the seller is a resident or is exchanging.
I am exchanging the entire sale through a qualified intermediary. Is anything withheld?
Not on the deferred gain, provided your Transferor's Certification fills in the section 1031 oval, states the deferred amount and consents to Massachusetts jurisdiction. The certification must reach the withholding agent before Form NRW is filed within 10 days of closing; without it the agent withholds 4% of your share of the gross price.
What does consenting to personal jurisdiction actually commit me to?
It means Massachusetts can determine and collect the tax, interest, penalties and fees on the deferred gain when it is realized, even if you have no other contact with the state by then. The regulation makes that consent the price of avoiding withholding on deferred gain, mirroring the state's rule that Massachusetts-source gain stays taxable when the replacement property is sold.
The sale closed November 15, 2025 and my attorney never filed Form NRW. What now?
The withholding agent is liable for failure-to-withhold penalties under chapters 62B and 62C, although the regulation relieves the agent if the tax on the gain is paid by the due date of your return or the agent relied in good faith on your certification. You remain responsible for the tax on any recognized gain; a completed exchange leaves none for 2025.
My exchange failed in March. Do I wait for my Massachusetts return to settle up?
No. Section (6)(c) of the regulation requires written notice to the Commissioner within ten days after the section 1031(a)(3) periods expire and payment of the withholding amount with the next estimated tax installment. Report the recognized gain on your nonresident return for the year it is recognized and claim that payment as a credit.
Sources
Checked against these publications on September 30, 2026. Rules and figures change; confirm the current version with your CPA or attorney before you act. This page is general information, not tax or legal advice.
- Massachusetts Department of Revenue, 830 CMR 62B.2.4: Withholding on Sales of Massachusetts Real Estate (promulgated 8/15/25)
- Massachusetts Department of Revenue, 2026 Transferor's Certification and instructions
- Massachusetts General Laws chapter 62B, section 2, Duty of employer; manner of computation; duty of commissioner
- 26 U.S.C. section 1031, Exchange of real property held for productive use or investment