FIRPTA stands for Foreign Investment in Real Property Tax Act and it is the Federal law governing the taxation & withholding by foreign persons selling US real estate.
Under FIRPTA, the buyer is required to withhold either 10% or 15% of the gross sales price from proceeds as a “deposit” due to IRS within 20 days after closing; when purchasing from a foreign seller (certain exceptions apply).
New for February 16, 2016 – If the total sale is more than $1,000,000 OR the property is not being acquired as a residence, the buyer is required to withhold 15% of the gross sales price.
A “foreign person” is defined under FIRPTA as a:
Affidavit can be executed by an “eligible” buyer.
Withholding Certificate may allow lesser amount withheld at closing.
No withholding required under FIRPTA if:
According to IRS.gov, the withholding amount on the sale of US property can be adjusted if the IRS issues a withholding certificate. A withholding certificate is an application for a reduced withholding based on the gain of a sale instead of the selling price.
If 15% of the selling price is more than the tax you will owe on this sale, then a withholding certificate may be ideal for you.
Important features to know about withholding certificate applications:
Let us help you start your application today!
Madison Fund Service, Ltd. specializes in ITIN applications, Withholding Certificate applications, and tax returns to claim your refund! Call us at 718-829-0134
Find out how we can serve you! Call (718) 829-0134 or request a free consultation.
Send us your tax documents safely and securely with our file sharing tool.
Receive financial tips, tax due dates and tax strategies right in your inbox.