California Tax Withholding
Moving or Living Out of State? Learn More About California Tax Withholding
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If you’re an out-of-state property owner with rental income from a California property, there’s an important state tax law you should be aware of. The California Franchise Tax Board (FTB) requires property managers to withhold 7% of gross rental income from non-resident property owners, unless a valid exemption or waiver applies. This law is called the California Tax Withholding.
At Good Life Property Management, we’re here to help you stay compliant while keeping the process stress-free and transparent.
What is California Tax Withholding?
Under California law, property managers must withhold 7% of the gross rental income paid to property owners who reside outside the state. Unfortunately, this isn’t optional, it’s a legal requirement aimed at ensuring non-resident property owners meet their California tax obligations. However, you may be eligible for an exemption or waiver.
Can I Avoid the Withholding?
Yes. Many owners qualify for reduced or waived withholding. There are two main ways to request relief:
Option 1: Withholding Exemption Certificate (Form 590)
If you’re already filing California tax returns or meet another exemption requirement, you can complete Form 590. This form, once submitted to us, allows us to stop withholding.
Option 2: Nonresident Withholding Waiver Request (Form 588)
If you don’t qualify for a standard exemption but believe withholding isn’t necessary in your case, you can apply directly to the FTB for a waiver using Form 588. If approved, it authorizes your property manager to withhold at a reduced rate, or not at all.
What Steps Should I Take?
1. Confirm Your Residency Status
Determine whether you’re considered a non-resident by California tax law.
2. See If You Qualify for Exemption
Review the criteria for Form 590. If you qualify, complete the form and submit it to our team.
3. Apply for a Waiver (Form 588)
If you’re not exempt but want to reduce or eliminate withholding, submit Form 588 directly to the FTB.
4. Send Us the Paperwork
Once your exemption or waiver is approved, send a copy to Good Life Property Management so we can adjust your withholding accordingly.
What Happens If I Don’t Submit Anything?
If we don’t receive a valid exemption (Form 590) or an approved waiver (Form 588), we are legally required to withhold 7% of your gross rental income each month and send it to the FTB on your behalf. We also charge a $50 per quarter Non-CA Tax Compliance Fee to cover this process, including calculations, payments, and tax form preparation.
Our property managers make owning rental property easy
Managing rental income across state lines shouldn’t feel complicated. At Good Life, we simplify the process so you can focus on enjoying your investment, not stressing over tax compliance.
If you have questions or need guidance on which form to submit, our team is happy to assist or refer you to a qualified tax professional.
