What is FIRPTA?

FIRPTA stands for the Foreign Investment in Real Property Tax Act. In plain English, it's a federal tax rule that makes sure foreign property owners pay US taxes when they sell real estate here. Here's how it works. When a foreign person or entity sells a property in the United States, the buyer is required to withhold 15 percent of the gross sale price at closing and send it to the IRS. So if a foreign seller sells a home for $400K, the buyer holds back $60K and sends it directly to the IRS on behalf of the seller. That withholding isn't a penalty or an extra tax. It's basically a prepayment toward whatever capital gains tax the foreign seller owes on the profit from the sale. When the seller files their US tax return for that year, the IRS figures out the actual tax owed. If the withholding was more than the tax due, the seller gets a refund. If it was less, the seller owes the difference. There are some exceptions and reduced rates. If the buyer is purchasing the property as their primary residence and the sale price is $300K or less, the withholding drops to zero. If the sale price is between $300K and $1 million and the buyer will use it as a primary residence, the withholding is 10 percent instead of 15. Foreign sellers can also apply for a withholding certificate from the IRS before closing to reduce the amount withheld if they can show the actual tax owed will be less than 15 percent. This takes time though, so it needs to be started well before closing. The important thing to understand is that FIRPTA is the buyer's responsibility to enforce. If the buyer fails to withhold and the seller doesn't pay, the IRS comes after the buyer. That's why title companies and real estate attorneys take this seriously and handle it at the closing table. Barrett Henry Broker Associate | REALTOR® RE/MAX Collective · The NOW Team Tampa Bay, Florida nowtb.com

his is a tax rule that affects foreign sellers. It stands for the Foreign Investment in Real Property Tax Act. If you are a foreign person (not a U.S. citizen or permanent resident) and you sell a U.S. property, the IRS wants to make sure they get their cut of any profit. To guarantee this, the buyer is required to withhold 15% of the sale price at closing and send it directly to the IRS.

When buying from a foreign owner in the US, 10% of the purchase price must be withheld along with appropriate documentation sent to the IRS.

FIRPTA stands for the Foreign Investment in Real Property Tax Act. In plain English, it's a federal tax rule that makes sure foreign property owners pay US taxes when they sell real estate here. Here's how it works. When a foreign person or entity sells a property in the United States, the buyer is required to withhold 15 percent of the gross sale price at closing and send it to the IRS. So if a foreign seller sells a home for $400K, the buyer holds back $60K and sends it directly to the IRS on behalf of the seller. That withholding isn't a penalty or an extra tax. It's basically a prepayment toward whatever capital gains tax the foreign seller owes on the profit from the sale. When the seller files their US tax return for that year, the IRS figures out the actual tax owed. If the withholding was more than the tax due, the seller gets a refund. If it was less, the seller owes the difference. There are some exceptions and reduced rates. If the buyer is purchasing the property as their primary residence and the sale price is $300K or less, the withholding drops to zero. If the sale price is between $300K and $1 million and the buyer will use it as a primary residence, the withholding is 10 percent instead of 15. Foreign sellers can also apply for a withholding certificate from the IRS before closing to reduce the amount withheld if they can show the actual tax owed will be less than 15 percent. This takes time though, so it needs to be started well before closing. The important thing to understand is that FIRPTA is the buyer's responsibility to enforce. If the buyer fails to withhold and the seller doesn't pay, the IRS comes after the buyer. That's why title companies and real estate attorneys take this seriously and handle it at the closing table. Barrett Henry Broker Associate | REALTOR® RE/MAX Collective · The NOW Team Tampa Bay, Florida nowtb.com

Buyers are required to hold a portion of the sales proceeds and send to IRS as a form of tax. It is generally between 10-15%.

FIRPTA is a tax law that imposes U.S. income tax on foreign persons selling U.S. real estate. Under FIRPTA, if you buy U.S. real estate from a foreign person, you may be required to withhold 10% of the amount realized from the sale. The amount realized is normally the purchase price.