If you’re selling Massachusetts real estate for $1 million or more, there is a relatively new closing requirement worth understanding before you reach the closing table.
The most important distinction is this:
A $1 million sale triggers a filing requirement. It does not automatically mean tax will be withheld from your proceeds.
For closings occurring on or after November 1, 2025, Massachusetts requires reporting for sales of Massachusetts real estate when the gross sales price is $1 million or more. Whether money must actually be withheld depends on the seller.
Source: Massachusetts Department of Revenue.
Does the $1 Million Rule Apply to Massachusetts Residents?
Yes, but that does not necessarily mean withholding applies.
For every qualifying $1 million+ transaction, each seller generally completes a Transferor’s Certification and provides it to the withholding agent on or before closing.
Full-year Massachusetts residents are generally exempt from withholding if they properly establish their exemption through the certification.
The transaction still has to be reported.
So, for example, a Wellesley homeowner selling a property for $1.5 million may owe no withholding at closing, but the required documentation still needs to be completed.
Source: Massachusetts Department of Revenue, Filing and Withholding Rules for Real Estate Sales of $1 Million or More.
Who Is Most Likely to Have Money Withheld?
The rule is particularly important for nonresident sellers.
For example, someone who moved from Massachusetts to New York or Florida but still owns a home, condominium or investment property in Massachusetts may be subject to withholding when that property is sold.
The withholding is not a new tax simply imposed because the property sold for more than $1 million. It is a mechanism Massachusetts uses to collect tax that may ultimately be due from the transaction.
Any amount withheld is applied toward the seller’s Massachusetts tax liability.
Source: Massachusetts DOR Regulation 830 CMR 62B.2.4.
How Much Can Be Withheld?
This is where the rule becomes financially significant.
Unless another calculation is elected, an individual seller subject to withholding generally has 4% of their share of the gross sales price withheld.
An additional 4% withholding may apply to the portion exceeding the Massachusetts surtax threshold.
For tax year 2026, that threshold is $1,107,750.
But sellers may be able to elect an alternative calculation based on estimated net gain rather than the gross sale price.
That difference can be substantial.
Example: A $1.4 Million Boston Condo
Imagine a New York resident sells a Boston condominium for $1,400,000.
Assume:
- Purchase price/basis: $900,000
- Qualifying improvements: $100,000
- Selling costs: $80,000
Her estimated net gain is approximately:
$1,400,000 − $900,000 − $100,000 − $80,000 = $320,000
Default calculation
Using the default gross-price method:
4% of $1,400,000 = $56,000
Because the sale price also exceeds the 2026 surtax threshold, additional withholding may apply.
Using the 2026 threshold, total withholding in this example would be approximately:
$67,690
Alternative calculation
If the seller qualifies for and elects the alternative calculation based on estimated net gain:
5% of $320,000 = $16,000
That’s a difference of more than:
$51,000
Same sale. Same property. Very different amount available at closing.
The alternative calculation must be elected through the Transferor’s Certification, it does not happen automatically.
Source: Massachusetts DOR Regulation 830 CMR 62B.2.4, Alternative Withholding Calculation.
What Is Form NRW?
The closing itself also has to be reported.
The withholding agent, typically the attorney, escrow company, title company or other party handling the closing, files Form NRW electronically with the Massachusetts Department of Revenue.
The filing is required even when the amount withheld is zero.
It must generally be submitted within 10 days of closing, together with the applicable Transferor’s Certifications.
What If Several People Own the Property?
The $1 million threshold applies to the total transaction, not each seller individually.
Suppose four siblings sell an inherited Lexington property for $1.6 million.
Each may own only 25% of the property, but the transaction still exceeds the $1 million threshold.
The withholding treatment is then determined separately for each seller.
One sibling could be a Massachusetts resident and exempt from withholding, while another living outside Massachusetts could be subject to it.
What About a Primary Residence?
Selling your primary residence does not eliminate the $1 million reporting requirement.
However, Massachusetts regulations recognize situations where gain is not subject to tax, including qualifying principal-residence exclusions. In those cases, withholding may potentially be reduced or eliminated.
Again, the key is making the appropriate determination before closing, rather than assuming the exemption will happen automatically.
The Most Important Document May Arrive Before Closing
For sellers, the practical lesson is straightforward:
Do not treat the Transferor’s Certification as routine paperwork.
It can determine whether:
- withholding applies;
- an exemption applies;
- withholding can be reduced; or
- withholding is calculated using gross sale price or estimated gain.
For a seven-figure transaction, those decisions can materially affect how much money is available when the property closes.
If you’re selling property in Boston, Wellesley, Lexington or elsewhere in Massachusetts, particularly if you now live outside the state, the withholding question should be addressed well before the closing date.
Frequently Asked Questions
Does Massachusetts automatically withhold tax when a property sells for more than $1 million?
No. The $1 million threshold triggers the reporting requirement. Whether money must actually be withheld depends on the seller’s circumstances.
I’m a Massachusetts resident. Will tax be withheld?
Full-year Massachusetts residents are generally exempt from withholding when the required Transferor’s Certification properly establishes the exemption.
Is the threshold based on profit?
No. The $1 million threshold is based on the gross sales price of the entire transaction, not the seller’s profit.
When did the rule take effect?
The Massachusetts real estate withholding regulation applies to closings occurring on or after November 1, 2025.
This article is for general informational purposes only and does not constitute legal or tax advice. Tax treatment depends on the facts of each transaction, and applicable rates and thresholds may change.
Sources:
Massachusetts Department of Revenue, Filing and Withholding Rules: Real Estate Sales of $1 Million or More
Massachusetts Department of Revenue, 830 CMR 62B.2.4: Withholding on Sales of Massachusetts Real Estate
Massachusetts Department of Revenue, Massachusetts 4% Surtax on Taxable Income
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