Georgia Nonresident Withholding: 4% and 3% Rates and Exemptions

Georgia nonresident withholding runs on two rates: a partnership, S corporation, or LLC must withhold 4% of a nonresident member’s share of Georgia-sourced income under O.C.G.A. 48-7-129, and a buyer purchasing Georgia real property from a nonresident must withhold 3% of the price under O.C.G.A. 48-7-128.¹² The payer holds the obligation in both cases, and Georgia’s flat income tax rate of 5.19% sits above both withholding rates, so the amount withheld usually covers only part of what the nonresident will owe.³

The 4% Withholding on Pass-Through Entity Income

If your partnership, S corporation, or LLC has any nonresident members and earns income sourced to Georgia, the entity is the withholding agent. It must withhold 4% of each nonresident member’s share of Georgia-sourced taxable income and send that amount to the Georgia Department of Revenue.¹ The individual members do not carry the duty; the entity does.

“Sourced to this state” points to income allocated or apportioned to Georgia under O.C.G.A. 48-7-31.¹ For multi-state entities, that means running the apportionment first and applying 4% only to the Georgia share. Georgia’s administrative regulation confirms the rate and adds a point that trips up some entities: the withholding still applies even if the member is making separate estimated tax payments to Georgia.⁴

Any excess withholding gets refunded when the member files a Georgia return.¹ Because 4% falls below Georgia’s 5.19% flat rate, though, most nonresident members will owe additional tax rather than see a refund.³

The 3% Withholding on Real Property Sold by Nonresidents

When a nonresident sells real property in Georgia, the buyer must withhold 3% of the purchase price and remit it to the Department of Revenue. The rule reaches both the real property and any related tangible personal property that changes hands in the transaction. A buyer who fails to withhold becomes personally liable for the tax that should have been collected.²

There is a ceiling. If 3% of the price exceeds the net proceeds the seller would receive at closing, the buyer withholds only the net proceeds.²

Using a Gain Affidavit to Lower the Withholding

Withholding 3% of the full sale price often overshoots the actual tax due, particularly when the seller has a high cost basis. The statute lets the seller sign a sworn affidavit stating the gain they expect to recognize. On a valid affidavit, the buyer withholds 3% of the stated gain instead of 3% of the price.² The net-proceeds ceiling still applies to that reduced figure.

Why Buyers Cannot Treat This Casually

Personal liability for the buyer is not a theoretical hook. If the nonresident seller leaves the state without paying Georgia tax on the gain, the Department of Revenue can collect the missing withholding from the buyer. Title companies and closing attorneys handling nonresident sales should build the calculation into the settlement statement and hold onto any gain affidavit as proof of what was owed and paid.

Exemptions and Treaty Reductions

Both statutes have carve-outs. Regulation 560-7-8-.34 notes that certain nonresident members may be exempt from the 4% pass-through withholding.⁴ Income that is not subject to Georgia income tax under O.C.G.A. 48-7-31, including certain income tied to federally exempt organizations, can also fall outside the withholding base.⁵

On the real estate side, O.C.G.A. 48-7-128 contains specific exceptions to the 3% requirement. Sales of a principal residence and transactions below a statutory dollar threshold are the most common paths out, and title companies routinely screen for them at closing.²

Federal income tax treaties can further reduce or eliminate withholding on payments to nonresident aliens. Treaties are negotiated at the federal level, but they matter here because Georgia’s taxable income starts from federal figures. Confirm any treaty position before applying the standard rate to a foreign member or seller.

Filing and Payment Mechanics

Withholding agents remit to the Department of Revenue on a schedule that generally tracks their federal deposit frequency. Form G-7 handles the periodic filing, whether quarterly or monthly. Monthly filers pay by the 15th of the following month.

After year-end, agents file Form G-1003, the Withholding Income Statement Transmittal, summarizing the year’s withholding and accompanying the W-2s or 1099s for each payee. Anyone who pays and files withholding electronically must also file the G-1003 and the income statements electronically, and the same rule applies to any filer already required to file income statements electronically at the federal level.⁶

Payers issuing Form 1099-NEC to nonresident payees can record state withholding in Boxes 5 through 7: state tax withheld, state and payer state ID, and state payment amount. Those boxes are optional at the federal level but useful for state matching, and payers in the Combined Federal/State Filing Program can use them to satisfy both filings at once.⁷

How the Nonresident Claims Credit for Amounts Withheld

The nonresident files Georgia Form 500, checks the “Nonresident” box on Page 1, and completes Schedule 3 instead of Lines 9 through 14. Each source of Georgia income and its associated withholding goes into an Income Statement section on Page 3: Line 4 for the Georgia income, Line 5 for the tax withheld. The total flows to Line 24 on Page 4 as a prepayment credit against Georgia liability. If withholding exceeded the tax owed, the difference comes back as a refund; if it fell short, the balance is due with the return. With the withholding rates below 5.19%, a balance due is the more common outcome.³

Penalties and Interest

A partnership, S corporation, or LLC that fails to withhold and remit the required 4% on a nonresident member faces a penalty of up to 25% of the amount that should have been withheld, on top of the unpaid withholding itself.¹ For entities with several nonresident members, that exposure adds up quickly.

Georgia’s general income tax penalties can also apply to withholding returns. Late filing runs 5% of the unpaid tax per month, capped at 25%. Late payment runs 0.5% of the unpaid tax per month, also capped at 25%. The combined late filing and late payment penalties cannot exceed 25% of the tax due on the original due date.⁸

Interest runs on any unpaid tax from the original due date to the date paid. Georgia sets the rate at the federal bank prime loan rate plus 3%, recalculated each year and accruing monthly. For 2026, the rate is 9.75%.⁹ A $50,000 underpayment generates roughly $4,875 in interest across a single year at that rate, and it compounds monthly.

An agent that missed a deadline or underpaid can ask for penalty abatement by showing reasonable cause. The bar is whether the agent exercised ordinary care and prudence but still could not comply. Not knowing the rules, or relying on a preparer who got them wrong, generally does not clear that bar. Documented efforts to comply, a clean prior history, and circumstances truly outside the agent’s control carry more weight.¹⁰

Recordkeeping

Keep records of nonresident payments, withholding calculations, and remittances for at least four years after the tax is due or paid, whichever is later, matching the federal retention window for employment tax records.¹¹ If there is any chance more than 25% of income went unreported, the federal assessment window stretches to six years, and holding records that long is the safer call.

For real property closings, buyers acting as withholding agents should keep the settlement statement, the remittance confirmation, and any gain affidavit signed by the seller. Those three documents together are the buyer’s proof of compliance if the Department of Revenue later asks whether the correct amount came out of the deal.

1
Justia Law. Georgia Code 48-7-129 – Withholding Tax on Nonresident Members of Partnerships, S Corporations, and Limited Liability Companies
2
Justia Law. Georgia Code 48-7-128 – Withholding Tax on Sale or Transfer of Real Property and Associated Tangible Personal Property by Nonresidents
3
Georgia Department of Revenue. Important Tax Updates
4
Legal Information Institute. Georgia Regulation 560-7-8-.34 – Withholding on Nonresident Members of Partnerships, S Corporations, and Limited Liability Companies
5
Justia Law. Georgia Code 48-7-31 – Allocation and Apportionment of Income
6
Georgia Department of Revenue. G-1003 Withholding Income Statement Transmittal
7
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
8
Georgia Department of Revenue. Penalty and Interest Rates
9
Georgia Department of Revenue. ADMIN-2026-01 – Annual Notice of Interest Rate Adjustment
10
Internal Revenue Service. Penalty Relief for Reasonable Cause
11
Internal Revenue Service. Topic No. 305, Recordkeeping