Selling a Nantucket home as a nonresident: the Massachusetts withholding at closing
If you own on Nantucket and live in New York, Connecticut or anywhere else outside Massachusetts, a sale now carries a step that didn't exist two years ago. It isn't a new tax. It's the state collecting, at the closing table, a prepayment toward the tax a nonresident already owed on the gain. Handled early, it's a form and a conversation with your CPA. Discovered at closing, it can hold back a six-figure sum you were counting on.
Why nearly every island sale is covered
The rule applies to real estate closings on or after November 1, 2025 with a gross sales price of $1,000,000 or more. On Nantucket that describes almost everything: of the 778 single-family houses that sold through LINK over the last three years, 771 closed at $1 million or more, and over the last twelve months it was 287 of 288.
Two details catch people. The gross sales price counts everything the seller receives, including the value of any other property and any debt the buyer takes on, not just the cash. And the $1 million test applies to the whole sale: if four siblings each receive less than $1 million from a $1.6 million sale, the sale is still covered.
How much is withheld
For individual sellers, the default is 4% of the gross sales price. A seller can instead elect the alternative calculation: 5% of the estimated net gain. Either way, when the figure being taxed (the price, or the estimated gain) is above the Massachusetts surtax threshold, another 4% is withheld on the amount above it. The threshold for 2026 is $1,107,750.
Corporations follow a parallel rule: 4% of the gross sales price, or 8% of the estimated net gain if they elect it.
The election is the seller's to make, on the certification described below. Without it, the default applies.
Who handles it at closing
The withholding agent is whoever is responsible for closing the sale, which on Nantucket is usually the closing attorney, and otherwise an escrow or title company. If nobody fills that role, the buyer does.
The agent files Form NRW electronically with the Department of Revenue within 10 days of closing, sends in any amount withheld, and attaches each seller's certification and the settlement statement. The form is filed on every sale of $1 million or more, even when nothing is withheld.
The Transferor's Certification every seller signs
Each seller completes a Transferor's Certification and gives it to the withholding agent on or before closing. It's the document that does the work: it's where a seller claims an exemption, claims a reduction, or elects the alternative calculation.
- Every owner signs their own. Joint owners each complete one, spouses included, and the price is split equally between spouses.
- It can be signed electronically, and someone holding your power of attorney can complete it for you.
- If it isn't in by closing, the agent withholds on the full gross price at the full rate.
The alternative calculation needs a real estimate of your gain, which starts with what you paid and what you've put into the house since. For a family that has owned for decades, those records take time to assemble. That's the practical reason to start this well before closing week.
Who certifies out
Some sellers owe no withholding at all, provided they sign the certification saying so. Among them:
- full-year Massachusetts residents
- resident trusts and the estates of resident decedents
- pass-through entities
- corporations with a continuing Massachusetts business presence
- a list of institutional sellers, including qualifying charities, government bodies and financial institutions
Many Nantucket houses are held in trusts or LLCs, and here the form follows how the entity is treated for tax purposes. A trust that is disregarded for tax purposes, such as a grantor trust, isn't the seller at all: its beneficial owners are, and each signs a certification. A trust that passes all of the gain through to its beneficiaries untaxed counts as a pass-through entity. An LLC is treated the way it is for federal tax purposes. Your closing attorney will know which applies to yours, and it's worth asking early.
When less is withheld
Even a seller who isn't exempt can have the amount reduced, again through the certification. The two situations that come up on the island are a sale where the withholding would be more than what's left after the mortgage and other liens are paid off at closing, and a sale where part of the gain isn't taxed. The regulation also covers a few rarer cases, including foreclosures and property that sits only partly in Massachusetts.
Getting the money back
Withholding is a prepayment, not a final bill. You report the sale on your Massachusetts return for the year it closed and claim the amount withheld as a credit against the tax due; anything withheld beyond your actual tax comes back as a refund or rolls into next year's estimated tax. Each January, the Department of Revenue sends every seller who had withholding paid on their behalf a statement of the amount, much like a W-2.
The timing is worth planning around. A house that closes in October doesn't settle its Massachusetts tax until the return is filed the following spring, so money held back at closing can be tied up for months.
What to bring to your closing attorney and CPA
- How title is held: individuals, a trust, an LLC, and who the beneficial owners are
- Where each owner is resident for tax purposes
- Your basis records: the purchase price, closing statement and receipts for improvements
- Mortgage and lien payoff figures
- Whether to elect the alternative calculation, and, if you file jointly, whether an estimated tax payment makes sense for the surtax