Accepted Answer

Hello again relocating,

What the law in CO requires is that for nonresidents who sell property in the state, if the selling price is $100,000 or more, then the title company is required to withhold 2% of the selling price to cover any possible CO state taxes which might be due on the sale.

However, there are certain exceptions where the title company is not required to withhold this amount. One of the exceptions is if the transferor of the property is selling their principal residence which will qualify for the exclusion of gain provided by IRS code 121. In order to achieve this, you would need to provide the title company with a written affirmation which certifies that the property being sold does qualify to be treated as your principal residence under IRS code section 121.

Please refer to page 3 of the following form 1083 and instructions, and refer in particular to the paragraph entitled "Exceptions to Withholding".

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1239161362926&ssbinary=true

As long as this home qualifies to be treated as your primary residence, and you will have no gain due to the allowed exclusion, then you will also owe no tax to the state of CO on this transaction, and you may provide the required affirmation which will allow the title company to withhold no tax on your sale.

If this was helpful please press the Accept button.

Thank you relocating, and let me know if this still does not address your question.

Expert:	Merlo
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Answered:	10/10/2009

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25+ years tax consulting. Specializing in returns for US citizens living abroad