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Tax Changes for Out-of-State Residents You Should Know

Those with a 2nd home in Delaware may be affected by these Income Tax changes.

Changes are coming in January 2019 that may affect you when you sell a 2ndhome in Delaware but live in another state.

Estimated Income Tax will be collected at settlement

Lets say you purchased a second home in Delaware but your primary residence is in New Jersey or New York or anywhere but Delaware. If you decide to sell that home, taxes may be due. But here is the change that goes into effect January 1st, 2019:

Delaware now requires Out-of-State Sellers to pay the tax as part of the settlement of their property. The Delaware Contract is now being modified to add a disclaimer to Sellers advising them of their responsibility to pay the tax. Sellers will be required to provide the calculation from their CPA, using Form 5403, to the Attorney at settlement. The Settlement Attorney is required to report it to the State.

So, what happens if the Seller does not bring the completed Form 5403 to the settlement table? Settlement will not occur. Let me repeat that

Settlement will not occur if the Seller does not bring completed Form 5403 to settlement.

At Active Adults Realty, we have added this to our Listing Checklist. If you list your home for sale with us, we will make sure you know about this requirement.

What if you are a Buyer expecting to go to settlement, BUT the seller is an out-of-state resident and does not comply with this requirement? See above; your settlement will not occur. If you are working with an Active Adults Realty Buyers Agent, we will make sure that the Listing Agent has reviewed this with the Seller and do our very best to make sure that settlement will not be delayed.

For more information please go back and review our other articles on the topic of real estate taxes and Capital Gains:

If you are preparing to buy or sell a home with active adult living in mind, why not sit down with an Active Adults Realty agent here in Delaware, and discuss the best way to prepare to get a great deal. We are happy to have a no-strings-attached discussion with you and help you best prepare to make the right decision on a home when the time arrives. Contact us today to schedule an appointment.