Delaware Withholding Requirements

The State of Delaware requires the withholding of taxes for any non-resident who sells real property in Delaware. This requirement applies whether the seller is an individual, a corporation, or a pass-through entity (such as a partnership, limited liability company or S-Corp). This payment must be made before the deed for the sale can be recorded, and will be collected at settlement. Please be aware that if you are moving out of Delaware on or prior to December 31, then you are considered a non-resident for purposes of withholding.

Delaware Form 5403 is used to administer withholding. This form must be filed with the deed for all transactions. Note on Form 5403 that if none of the exemptions in Section 5 are applicable to the seller’s situation, then the seller must fill out Section 6 and Section 7 or Section 8. If the seller is a pass-through entity with one or more members that are non-resident individuals, then the seller will be subject to withholding and the seller may not select that they are a resident pass through entity not subject to withholding.

Any questions concerning withholding should be directed to your tax professional.

Form 5403