Foreign Investment in Real Estate Property Tax Act
When you purchase a house or building from a non-U.S. resident, there is a Firpta tax. Firpta is the Foreign Investment in Real Property Tax Act Withholding. Therefore, it authorizes the United States to tax foreign persons on dispositions of real estate interests. When purchasing U.S. property from foreign persons, there is a required 15% withholding. It is your responsibility to find out if the seller is a foreign person. Unfortunately, if you fail to withhold, you may be liable for the tax.
Firpta is exempted if the purchase price is not more than $300,000, but there is a withholding exemption, the seller is still responsible for the seller’s tax liability, interest and penalties if the seller does not file a US tax return reporting the sale or pay taxes associated with the property.
U.S. Tax Law
The 15% withholding of the gross sales prices, ex. $60,000 on a property with a sales price of $400,000). The withheld amount must be forwarded to the IRS, by the closing agent within 20 days of the date of the closing. These funds are held until the IRS is satisfied that all taxes due by the non-resident are paid.
Richard S. Weinstein, Real Estate Attorney
First and foremost, it is crucial that you hire an experienced real estate attorney to review any legal documents surrounding a home or office purchase from a non-U.S. resident to ensure that you are withholding the Firpta and correctly reporting it to the IRS. Richard S. Weinstein can help you navigate the process and inform you of any exemptions.
With over 40 years experience in the practice of law, attorney Richard Weinstein assists clients with the important financial situations in their lives, as well as civil litigation. Whether you are dealing with bankruptcy, real estate (both commercial and residential, including foreclosures and title insurance), estate planning or probate, or business formations, sales or mergers, Richard Weinstein is the attorney with the experience and knowledge you need! Call us at (561)745-3040 or visit his website at rweinsteinlaw.com.
Law Office of Richard S. Weinstein, P.A.
250 S. Central Blvd. #101
Jupiter, FL 33458
Phone: (561) 745-3040
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