What Foreign Sellers Of US Real Estate Need To Know About FIRPTA Withholding And ExceptionsJan 30 20

What Foreign Sellers Of US Real Estate Need To Know About FIRPTA Withholding And ExceptionsJan 30 20


What Foreign Sellers Of US Real Estate Need To Know About FIRPTA Withholding And Exceptions


Since June 18 1980 Foreign sellers of US Real Property are subject to the Foreign Investment in Real Property Tax Act also known as FIRPTA.

A withholding requirement was introduced after December 1984 to ensure that taxes were paid by foreign sellers.

That withholding requirement was originally 10% of the sales price of the property but on February 17 2016 that was increased to 15% of the sales price.

The 15% is not the amount of tax that will be paid but it is an amount considered by the treasury to likely cover any capital gains tax that might be due.

Who is Considered a Foreign Seller?

    Non-resident Alien

    Foreign corporation

    Foreign estate

    Foreign trust

It does not include resident aliens who are US tax residents.

Exceptions to Withholding

There are a couple of notable exceptions to the withholding rule.

    1.  If the sales price is $300,000 or less and the buyers sign an affidavit stating that they, or their family, will reside at the home for at least half of the time that the home is occupied, for the next two years, then no withholding is required.

    2.  Most foreign sellers have the opportunity to reduce the withholding amount by filing for a withholding certificate from the IRS.  This can reduce the withholding to an amount that is much closer to what will actually be the correct tax amount assessed. Form 8288-B is used for the application for a withholding certificate. Sellers need to be prepared early in the process to take advantage of this and it will pay to have a good team in place to handle your taxation and your real estate requirements. Sellers will need to have an ITIN to sell their home, and should also have receipts and invoices for improvements at hand, previous tax returns if existing, rental information, etc.  

Buyers of Foreign Owned US Property

Buyers of property being sold by foreign owners are responsible to ensure that withholding occurs when closing the deal and could be held liable if withholding does not take place. The withholding is normally completed by the title company sometimes in conjunction with an accountant hired by the seller to prepare the withholding documents.

Contact us today to talk to a real estate agent with experience in pulling together all the elements necessary to complete a sale involving a foreign seller.

To get an estimated value on your property use the tool below.

Property valuation tool: http://conor.floridapropertytours.com/sell.php

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Phone: 727-967-0928
Dated: February 2nd 2017
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