89-386: Affidavit for Withholding Income Tax on Sale of Real Estate by Non-Resident (2024)
Mississippi · Mississippi DOR · Used for tax years 2024
Mississippi Form 89-386 is an affidavit for income tax withholding on a nonresident's sale of real estate. It records the seller, buyer, property, sales price, gain, net proceeds and withholding amount, with schedules to calculate the gain and net proceeds.
Who files this form
Form 89-386 is an affidavit for withholding Mississippi income tax on a sale of real estate by a non-resident seller. The seller swears to the facts under penalty of perjury and states that they will file all state income tax returns due.
What you'll need
Have the following information ready to complete the affidavit:
- Seller’s and buyer’s names and addresses.
- Property description, location and tax map parcel number.
- Closing date and total sales price.
- Selling expenses, including attorney fees, real estate commission, termite and heating and air letter fees, and any other listed expenses.
- Tax basis of the property for Schedule A.
- Mortgages, liens or credit line advances for Schedule B, subject to the form’s deduction restrictions.
- Seller’s Social Security number, plus the spouse’s Social Security number or ID number for the spouse field.
The form includes seller and spouse signature fields and a notary acknowledgment. For a mortgage, lien or credit line advance made less than one year before closing, the buyer must obtain the seller affidavit described on page 2 before deducting it.
How to file
- Enter the seller, buyer, property and closing information on page 1.
- Complete Schedule A on page 2: subtract selling expenses from the total sales price, then subtract the tax basis. Enter the resulting gain on page 1, line 5.
- Complete Schedule B on page 2: subtract selling expenses from the total sales price, then subtract qualifying mortgages, liens or credit line advances. Enter the resulting net proceeds on page 1, line 7.
- On this 2024 form, multiply the gain on line 5 by 4.7% and enter the result on line 6. Enter the smaller of line 6 or line 7 as the withholding amount on line 8.
- Complete the signature and notary acknowledgment portions. The acknowledgment calls for the seller to appear personally before the notary.
Mail to:
MS Department of Revenue
P.O. Box 23050
Jackson, MS 39225-3050
Common mistakes
- Deducting mortgages or liens on other property. Only mortgages and liens on the property being sold may be deducted from the sales price.
- Ignoring the restrictions on borrowing in contemplation of the sale. The form restricts deductions for mortgages, liens or credit line advances made in contemplation of the sale. The buyer may presume that those made more than one year before closing were not made in contemplation of the sale.
- Deducting recent borrowing without the required affidavit. For a mortgage, lien or credit line advance made less than one year before closing, the buyer cannot deduct it unless the seller provides an affidavit stating that it was not made in contemplation of the sale. That affidavit must meet the requirements and include all information contained in this affidavit.
Questions people ask
How is the withholding amount calculated?
On the 2024 form, multiply the gain on page 1, line 5 by 4.7%. The required withholding on line 8 is the smaller of that result or the net proceeds on line 7.
What is the difference between gain and net proceeds?
Schedule A calculates gain by subtracting selling expenses and tax basis from the total sales price. Schedule B calculates net proceeds by subtracting selling expenses and qualifying mortgages, liens or credit line advances from the total sales price.
Does the affidavit need a notary acknowledgment?
The form includes a notary acknowledgment stating that the seller personally appeared and acknowledged signing and delivering the affidavit.
Does the seller still need to file state income tax returns?
The affidavit states that the seller will file all state income tax returns due.