West Virginia Form NRAE: Exemption From Nonresident Seller Withholding

The withholding falls on the closer, and it happens before the deed records

W. Va. Code section 11-21-71b puts the duty on the "real estate reporting person, as defined under Section 6045 of the Internal Revenue Code," to withhold from a nonresident transferor and pay the Tax Commissioner "within thirty days of the date the amounts were withheld." The Tax Division's publication TSD-389 explains that this means the attorney or title company closing the deal, the lender or a broker, and that "the buyer of the property is not the individual in charge of reporting the real estate transaction unless there is no attorney, mortgage lender or broker involved."

TSD-389 states the two measures: "Either 2.5% of the total payment to the nonresident individual or entity or 4.58% of the estimated capital gain derived from the sale or exchange must be withheld," and that this "must be done before the deed or other instrument transferring title to the realty is presented for recordation." Total payment is the sales price minus the seller's secured debts being paid off and the seller's selling expenses on the settlement statement.

The publication lists six statutory exceptions: a resident seller, a certificate from the Tax Division, a foreclosure or deed in lieu, a governmental transferor, the seller's principal residence, and a deed reciting zero consideration. A 1031 exchange is not on that list, so the certificate route is the only one that fits an exchange.

Form NRAE, line by line, with the exchange on reason 8

Form WV NRAE opens with the seller's identity and entity type, then the property, the contract date, the closing date and the sales price. It asks how the seller acquired the property, with a box for a 1031 exchange, and for an adjusted basis computation: purchase price, plus capital improvements and settlement costs, less depreciation.

The reasons for exemption are numbered 1 through 13. Reason 8 reads "transfer is a tax-free exchange," and reason 13 covers a transfer "otherwise fully or partially exempt from the recognition of gain in accordance with the attached explanation." Each reason has a column for the "amount of total payment subject to tax," which is where boot goes. The calculation block then applies either 2.5% of total payments or 4.58% of estimated capital gains to that amount, and line 3 of the block, the tax to be withheld at closing, "must be completed" even when it is zero.

The form is signed under penalties of perjury and mailed to the Tax Account Administration Division in Charleston or filed through the state's online tax portal. A separate NRAE is required for each seller receiving proceeds, with the exception of spouses filing jointly. Attach the exchange agreement with the qualified intermediary; the instructions require documentation and a calculation for every reason claimed.

Twenty-one days is a receipt deadline, not a mailing date

The form itself says it "must be received by the WV State Tax Department, Tax Account Administration Division no later than 21 days before the closing date," and the instructions add that the timing is "to ensure timely receipt of the Certificate of Full or Partial Exemption." Count back from the contract closing date and allow for a reschedule; an earlier closing can leave a certificate that has not yet issued.

If the deadline is missed, the closer withholds at the table and files Form WV/NRSR, Return of Income Tax Withholding for Nonresident Sale of Real Property, with the payment within 30 days. The money then sits with the state instead of the qualified intermediary, which shrinks what you can reinvest; the mechanics of that shortfall are on state withholding at closing in a 1031 exchange.

TSD-389 describes a third form, NRER, an application for an early refund that cannot be filed before 30 days after the transfer or after December 15 of the year of sale, and notes that the appropriate West Virginia income tax return must still be filed to obtain the refund. West Virginia and Maryland share the 21-day rule; the full list is on exemption filing deadlines by state.

Boot, partial exemptions and the NRSR at closing

A partial exemption is built into the form. If you will take cash out of the exchange, enter that amount in the "amount subject to tax" column next to reason 8 and the certificate will state the reduced withholding. The NRSR instructions say that where a Certificate of Partial Exemption is issued, the closer skips the computation lines and enters "the amount stated on Form WV/NRCE" on line 8i.

Hypothetical: a Pennsylvania resident sells a Morgantown rental for $600,000, pays off a $350,000 mortgage and $40,000 of selling expenses, and keeps $30,000 outside the exchange. Total payment is $210,000, so default withholding would be $5,250 at 2.5%. With an NRAE claiming reason 8 and $30,000 subject to tax, withholding is $750 at 2.5%, or 4.58% of the gain inside that $30,000 if the gain method is elected and lower. Run your own numbers with your CPA. What counts as boot is on what boot is in a 1031 exchange.

Copy B of the NRSR goes to the seller at closing and must be attached to the West Virginia return to claim the credit: Form IT-140 for individuals and revocable trusts, CNF-120 for C corporations, SPF-100 for S corporations, partnerships and LLCs, and IT-141 for trusts and estates. The instructions warn that claiming the withholding on the wrong line can result in the credit being denied.

Entities, registration and the rest of the West Virginia closing

A "nonresident entity" is one not formed under West Virginia law and not registered with the Tax Division to do business in the state. TSD-389 adds the practical corollary: "If the entity holds a current West Virginia business registration certificate, no withholding is required." An out-of-state LLC that has been filing West Virginia returns on its rental may already be outside the rule, which is worth confirming before paying for an NRAE.

The NRAE and the NRSR address income tax withholding only. West Virginia's transfer excise tax on the deed is a separate, grantor-paid charge that no exchange affects, and the state's 2026 rate changes and the absence of any claw-back on deferred gain are covered on 1031 exchange rules in West Virginia. The states that withhold, with their forms and timing, are tabled on which states withhold at closing.

• Day 21 or earlier before closing: NRAE received in Charleston with the exchange agreement and basis calculation.
• Closing: certificate delivered to the closing attorney; NRSR completed at zero or at the partial amount on Form WV/NRCE.
• Within 30 days: closer remits any withholding with NRSR Copy A; seller keeps Copy B.
• Following year: West Virginia nonresident return filed with Copy B attached.