- Any purchaser of a U.S. Real Property Interest (U.S.RPI) should be aware of the seller’s U.S. residency status.
- If you are a foreign seller of U.S.RPI, the purchaser will withhold and remit 15% at settlement unless you apply for a withholding exemption.
- An example of an exception with no withholding: If the gross sales price is $300,000 or less and the purchaser intends to use the property as a residence.
- All of this is in an effort to reduce the amount of withholding up front prior to filing of the tax return by the seller.
Foreign Investment in Real Property Tax Act
What We Do
Freed Maxick can guide you through this complex process. The FIRPTA withholding tax is calculated based on the gross sales price, with no consideration for the actual gain or loss. As a result, even on a loss transaction, foreign real property sellers are looking at the potential of a 15% tax withholding from the gross proceeds.
What to Know
If you are selling a piece of U.S. real estate, you may have a tax withholding obligation to the purchaser. FIRPTA requires that a purchaser of U.S. real property withhold tax on the gross sale price if the seller is a non-U.S. person. A non-U.S. person for this purpose includes all foreign persons and foreign entities selling or transferring property located in the U.S. Any withholding tax owed (including interest) that isn’t remitted becomes a liability to the purchaser.
Key Considerations
Your Expert
William S. Iannarelli, CPA
Director
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